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Monetary policy rules and the Great Inflation

Athanasios Orphanides ()

No 2002-8, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (US)

Abstract: The nature of monetary policy during the 1970s is evaluated through the lens of a forward-looking Taylor rule based on perceptions regarding the outlook for inflation and unemployment at the time policy decisions were made. The evidence suggests that policy during the 1970s was essentially indistinguishable from a systematic, activist, forward-looking approach such as is often identified with good policy advice in theoretical and econometric policy evaluation research. This points to the unpleasant possibility that the policy errors of the 1970s occurred despite the use of a seemingly desirable policy approach. Though the resulting activist policies could have appeared highly promising, they proved, in retrospect, counterproductive.

Keywords: Monetary policy; Inflation (Finance) (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-mon
Date: 2002
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