IDEAS home Printed from,pt.2.html
   My bibliography  Save this article

Origins of the Great Inflation


  • Allan H. Meltzer


The Great Inflation from 1965 to 1984 is the climactic monetary event of the last part of the 20th century. This paper analyzes why it started and why it continued for many years. Like others, it attributes the start of inflation to analytic errors, particularly the widespread acceptance of the simple Keynesian model with its implication that monetary and fiscal policy should be coordinated. In practice, that meant that the Federal Reserve financed a large part of the fiscal deficit. This paper gives a large role to political decisionmaking. Continuation of inflation depended on political choices, analytic errors, and the entrenched belief that inflation would continue.

Suggested Citation

  • Allan H. Meltzer, 2005. "Origins of the Great Inflation," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 145-176.
  • Handle: RePEc:fip:fedlrv:y:2005:i:mar:p:145-176:n:v.87no.2,pt.2

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
    2. Bordo, Michael D. & Schwartz, Anna J., 1999. "Monetary policy regimes and economic performance: The historical record," Handbook of Macroeconomics,in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 3, pages 149-234 Elsevier.
    3. Richard G. Anderson & Robert H. Rasche, 1999. "Eighty years of observations on the adjusted monetary base: 1918-1997," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 3-22.
    4. Bordo, Michael D. & Schwartz, Anna J., 1999. "Monetary policy regimes and economic performance: The historical record," Handbook of Macroeconomics,in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 3, pages 149-234 Elsevier.
    5. John B. Taylor, 1999. "Monetary Policy Rules," NBER Books, National Bureau of Economic Research, Inc, number tayl99-1, January.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Steinar Holden & Fredrik Wulfsberg, 2009. "Wage Rigidity, Institutions, and Inflation," CESifo Working Paper Series 2554, CESifo Group Munich.
    2. Peter M. Summers, 2005. "What caused the Great Moderation? : some cross-country evidence," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 5-32.
    3. Benati, Luca, 2011. "Would the Bundesbank have prevented the Great Inflation in the United States?," Journal of Economic Dynamics and Control, Elsevier, vol. 35(7), pages 1106-1125, July.
    4. Traum, Nora & Yang, Shu-Chun S., 2011. "Monetary and fiscal policy interactions in the post-war U.S," European Economic Review, Elsevier, vol. 55(1), pages 140-164, January.
    5. Weise, Charles L, 2008. "Political constraints on monetary policy during the Great Inflation," MPRA Paper 8694, University Library of Munich, Germany.
    6. Sharon Kozicki & Peter A. Tinsley, 2005. "Perhaps the FOMC did what it said it did : an alternative interpretation of the Great Inflation," Research Working Paper RWP 05-04, Federal Reserve Bank of Kansas City.
    7. Anthony M. Diercks & William Waller, 2017. "Taxes and the Fed : Theory and Evidence from Equities," Finance and Economics Discussion Series 2017-104, Board of Governors of the Federal Reserve System (U.S.).
    8. Taiji Harashima, 2005. "The Cause of the Great Inflation: Interactions between the Government and the Monetary Policymakers," Macroeconomics 0510026, EconWPA, revised 17 Nov 2005.
    9. Brian Snowdon, 2007. "The New Classical Counter-Revolution: False Path or Illuminating Complement?," Eastern Economic Journal, Eastern Economic Association, vol. 33(4), pages 541-562, Fall.
    10. Otmar Issing, 2010. "The development of monetary policy in the 20th century – some reflections," Working Paper Research 186, National Bank of Belgium.
    11. Weise, Charles L., 2009. "Political Constraints on Monetary Policy During the U.S. Great Inflation," MPRA Paper 18700, University Library of Munich, Germany.


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedlrv:y:2005:i:mar:p:145-176:n:v.87no.2,pt.2. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kathy Cosgrove). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.