Monetary Policy Rules and the Great Inflation

12 Pages Posted: 11 Feb 2002

See all articles by Athanasios Orphanides

Athanasios Orphanides

Massachusetts Institute of Technology (MIT) - Sloan School of Management; Asia School of Business

Date Written: January 2002

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 rules, inflation, unemployment, Greenbook forecasts

JEL Classification: E3, E52, E58

Suggested Citation

Orphanides, Athanasios, Monetary Policy Rules and the Great Inflation (January 2002). Available at SSRN: https://ssrn.com/abstract=299671 or http://dx.doi.org/10.2139/ssrn.299671

Athanasios Orphanides (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

HOME PAGE: http://mitsloan.mit.edu/faculty/detail.php?in_spseqno=54058

Asia School of Business ( email )

Jalan Kuching, Kuala Lumpur, Wilayah Persekutuan K
Kuala Lumpur, MA
Malaysia

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