The Incredible Volcker Disinflation

Marvin Goodfriend and Robert King ()

No 11562, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using a simple modern macroeconomic model, we argue that the real effects of the Volcker disinflation in the early 1980s were mainly due to imperfect credibility, evident in volatility and stubbornness of long-term interest rates. Studying recently released transcripts of the Federal Open Market Committee, we find -- to our surprise -- that Volcker and other FOMC members also regarded long-term interest rates as key indicators of inflation expectations and of their disinflationary policy's credibility. We also consider the interplay of monetary targets, operating procedures, and credibility during the Volcker disinflation.

JEL-codes: E3 E4 E5 N1 (search for similar items in EconPapers)
Date: 2005-08
New Economics Papers: this item is included in nep-cba, nep-his, nep-mac and nep-mon
Note: EFG ME
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Citations: View citations in EconPapers (177)

Published as Goodfriend, Marvin and Robert G. King. "The Incredible Volcker Disinflation," Journal of Monetary Economics, 2005, v52(5,Jul), 981-1015.

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Journal Article: The incredible Volcker disinflation (2005)
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