Monetary policy neglect and the Great Inflation in Canada, Australia, and New Zealand

Edward Nelson

No 2004-008, Working Papers from Federal Reserve Bank of St. Louis

Abstract: This paper studies the Great Inflation in Canada, Australia, and New Zealand. Newspaper coverage and policymakers' statements are used to analyze the views on the inflation process that led to the 1970s macroeconomic policies, and the different movement in each country away from 1970s views. I argue that to understand the course of policy in each country, it is crucial to use the monetary policy neglect hypothesis, which claims that the Great Inflation occurred because policymakers delegated inflation control to nonmonetary devices. This hypothesis helps explain why, unlike Canada, Australia and New Zealand continued to suffer high inflation in the mid-1980s. The delayed disinflation in these countries reflected the continuing importance accorded to nonmonetary views of inflation.

Keywords: Monetary policy; Inflation (Finance) (search for similar items in EconPapers)
Date: 2004
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (5)

Published in International Journal of Central Banking, June 2005, 1(1), pp. 133-79

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Related works:
Journal Article: Monetary Policy Neglect and the Great Inflation in Canada, Australia, and New Zealand (2005)
Working Paper: Monetary Policy Neglect and the Great Inflation in Canada, Australia, and New Zealand (2005)
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