Even Keel and the Great Inflation

Victoria Consolvo (vicki.consolvo@gmail.com), Owen Humpage and Sanchita Mukherjee (sanchitam@gmail.com)

No 20-33, Working Papers from Federal Reserve Bank of Cleveland

Abstract: During the early part of the Great Inflation (1965-1975), the Federal Reserve undertook even-keel operations to assist the US Treasury’s coupon security sales. Accordingly, the central bank delayed any tightening of monetary policy and permanently injected reserves into the banking system. Using real-time Taylor-type and McCallum-like reaction functions, we show that the Fed routinely undertook these operations only when it was otherwise tightening monetary policy. Using a quantity-equation framework, we show that the Federal Reserve’s even-keel actions added approximately one percentage point to the overall 5.1 percent average annual inflation rate over these years.

Keywords: Even Keel; Great Inflation; Federal Reserve; US Treasury (search for similar items in EconPapers)
JEL-codes: E5 F3 N1 (search for similar items in EconPapers)
Pages: 41
Date: 2020-10-23
New Economics Papers: this item is included in nep-cba, nep-his, nep-hpe, nep-mac and nep-mon
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Related works:
Working Paper: Even Keel and the Great Inflation (2015)
Working Paper: Even keel and the Great Inflation (2013)
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DOI: 10.26509/frbc-wp-202033

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