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The 1971-1974 Controls Program and The Price Level: An Econometric Post-Mortem

  • Alan S. Blinder
  • William J. Newton

This paper provides new empirical evidence on the effects of the Nixon wage-price controls on the price level. The major new wrinkle is that the controls are treated as a quantitative (rather than just a qualitative) phenomenon through the use of a specially-constructed series indicating the fraction of the economy that was controlled. According to the estimates, by February 1974controls had lowered the non-food non-energy price level by 3-4 percent. After that point, and especially after controls ended in April 1974, a period of rapid 'catch up' inflation eroded the gains that had been achieved, leaving the price level from zero to 2 percent below what it would have been in the absence of controls. The dismantling of controls can thus account for most of the burst of 'double digit' inflation in non-food and non-energy prices during 1974.

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File URL: http://www.nber.org/papers/w0279.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0279.

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Date of creation: Oct 1981
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Publication status: published as Blinder, Alan S. and Newton, William J. "The 1971-1974 Controls Program andthe Price Level: An Econometric Post-Mortem." Journal of Monetary Economics, Vol. 8, No. 1, (July 1981), pp. 1-23.
Handle: RePEc:nbr:nberwo:0279
Note: EFG
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  1. McGuire, Timothy W., 1976. "On estimating the effects of controls," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 2(1), pages 115-156, January.
  2. Feige, Edgar L. & Pearce, Douglas K., 1976. "Inflation and incomes policy: An application of time series models," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 2(1), pages 273-302, January.
  3. Darby, Michael R., 1976. "Price and wage controls: The first two years," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 2(1), pages 235-263, January.
  4. Joines, Douglas, 1977. "Short-Term Interest Rates as Predictors of Inflation: Comment," American Economic Review, American Economic Association, vol. 67(3), pages 476-77, June.
  5. Robert J. Gordon, 1975. "The Impact of Aggregate Demand on Prices," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 6(3), pages 613-670.
  6. Robert J. Gordon, 1973. "The Responses of Wages and Prices to the First Two Years of Controls," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(3), pages 765-780.
  7. Lipsey, R G & Parkin, J M, 1970. "Incomes Policy: A Re-appraisal," Economica, London School of Economics and Political Science, vol. 37(146), pages 115-38, May.
  8. Carlson, John A, 1977. "Short-Term Interest Rates as Predictors of Inflation: Comment," American Economic Review, American Economic Association, vol. 67(3), pages 469-75, June.
  9. Oi, Walter Y., 1976. "On measuring the impact of wage-price controls: A critical appraisal," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 2(1), pages 7-64, January.
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