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Would the Bundesbank have prevented the Great Inflation in the United States?

Luca Benati ()

No 1134, Working Paper Series from European Central Bank

Abstract: Policy counterfactuals based on estimated structural VARs routinely suggest that bringing Alan Greenspan back in the 1970s’ United States would not have prevented the Great Inflation. We show that a standard policy counterfactual suggests that the Bundesbank–which is near-universally credited for sparing West Germany the Great Inflation–would also not have been able to prevent the Great Inflation in the United States. The sheer implausibility of this result sounds a cautionary note on taking the outcome of SVAR-based policy counterfactuals at face value, and raises questions on the very reliability of such exercises. JEL Classification: E32, E47, E52, E58

Keywords: Bayesian VARs; great inflation; identified VARs; policy counterfactuals.; stochastic volatility; time-varying parameters (search for similar items in EconPapers)
Date: 2009-12
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Note: 802546
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Journal Article: Would the Bundesbank have prevented the Great Inflation in the United States? (2011) Downloads
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