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The Cause of the Great Inflation: Interactions between the Government and the Monetary Policymakers

Author

Listed:
  • Taiji Harashima

    (University of Tsukuba & Cabinet Office of Japan)

Abstract

The paper offers a new explanation for the cause of the Great Inflation by constructing a model that explicitly separates the roles of government and monetary policymakers. A mechanism that inflation can accelerate even if an inflation target is low is uncovered. The model solves the puzzle of the observed high inflation target during the Great Inflation and indicates that the policy errors at the time were not solely attributed to the monetary policymakers but made in the process of interaction between the governments and the monetary policymakers. The model is consistent with the international aspect of the Great Inflation.

Suggested Citation

  • Taiji Harashima, 2005. "The Cause of the Great Inflation: Interactions between the Government and the Monetary Policymakers," Macroeconomics 0510026, University Library of Munich, Germany, revised 17 Nov 2005.
    • Handle: RePEc:wpa:wuwpma:0510026
    Note: Type of Document - pdf; pages: 35
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/mac/papers/0510/0510026.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Harashima, Taiji, 2019. "A Theory of Inflation: The Law of Motion for Inflation under the MDC-based Procedure," MPRA Paper 113161, University Library of Munich, Germany.
    2. Harashima, Taiji, 2007. "The Optimal Quantity of Money Consistent with Positive Nominal Interest Rates," MPRA Paper 1839, University Library of Munich, Germany, revised 19 Feb 2007.
    3. Harashima, Taiji, 2007. "Why should central banks be independent?," MPRA Paper 1838, University Library of Munich, Germany, revised 19 Feb 2007.
    4. Harashima, Taiji, 2013. "Escaping a Liquidity Trap: Keynes’ Prescription Is Right But His Reasoning Is Wrong," MPRA Paper 48115, University Library of Munich, Germany.
    5. Harashima, Taiji, 2007. "Hyperinflation, disinflation, deflation, etc.: A unified and micro-founded explanation for inflation," MPRA Paper 3836, University Library of Munich, Germany.
    6. Taiji HARASHIMA, 2013. "The Phillips Curve And A Micro-Foundation Of Trend Inflation," Theoretical and Practical Research in the Economic Fields, ASERS Publishing, vol. 4(2), pages 151-182.
    7. Harashima, Taiji, 2008. "A Microfounded Mechanism of Observed Substantial Inflation Persistence," MPRA Paper 10668, University Library of Munich, Germany.
    8. Harashima, Taiji, 2006. "The Sustainability of Budget Deficits in an Inflationary Economy," MPRA Paper 905, University Library of Munich, Germany.

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    More about this item

    Keywords

    The Great Inflation; Inflation; Persistence; Monetary policy;
    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
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-

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