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The 1975-78 Anti-Inflation Program in Retrospect

Author

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  • John Sargent

Abstract

The author provides an overview of the 1975–78 Anti-Inflation Program (AIP), in a background document prepared for a seminar organized by the Bank of Canada to mark the AIP's 30th anniversary. After reviewing Canada's experience with, and policy response to, inflation in the decade preceding the introduction of the AIP, the author sets out the elements of the AIP's monetary and fiscal policy, and prices and incomes controls. He then compares the program's inflation objectives with the actual course of inflation and aggregate demand during, and immediately after, the AIP. Drawing on existing analyses of the program's monetary and fiscal policy and controls elements, the author discusses why the program's specific targets and general objectives were not met. He concludes, with the benefit of hindsight, that-while external factors contributed to the failure to meet objectives-monetary and fiscal policy were not suc h as to give the AIP a strong chance of fully succeeding. The program's controls element has generally been assessed more favourably, although certain specifics of the controls design can be questioned. The author briefly considers parallels with recent retrospective considerations of monetary and fiscal policy over the same period in the United States. He also attempts to draw some general lessons from the AIP experience and, more generally, from the 1970s experience. Given that the AIP was an early attempt at a form of inflation targeting, these include lessons that may be relevant to current policy with respect to inflation.

Suggested Citation

  • John Sargent, 2005. "The 1975-78 Anti-Inflation Program in Retrospect," Staff Working Papers 05-43, Bank of Canada.
  • Handle: RePEc:bca:bocawp:05-43
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    File URL: https://www.bankofcanada.ca/wp-content/uploads/2010/02/wp05-43.pdf
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    Citations

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    Cited by:

    1. William B.P. Robson, 2009. "To the Next Level: From Gold Standard to Inflation Targets - to Price Stability?," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 285, March.

    More about this item

    Keywords

    Credibility; Fiscal policy; Inflation and prices; Inflation targets; Monetary policy framework; Monetary policy implementation;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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