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

Taiji Harashima

Macroeconomics from University Library of Munich, Germany

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.

Keywords: The Great Inflation; Inflation; Persistence; Monetary policy (search for similar items in EconPapers)
JEL-codes: E31 E52 E65 N12 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2005-10-31, Revised 2005-11-17
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Note: Type of Document - pdf; pages: 35
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpma:0510026

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