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Lessons from the 1979-1982 Monetary Policy Experiment

15 Pages Posted: 9 Jun 2004  

Benjamin M. Friedman

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: February 1984

Abstract

The experience of U.S. monetary policy during 1979-82 provided useful and potentially important new evidence about how monetary policy affects economic activity. This paper considers, inthe light of that evidence, six familiar propositions supporting the use of monetary aggregate targets for monetary policy. These propositions deal with money and nominal income, with price inflation and real economic growth, and with long-term interest rates. The evidence from the1979-82 experiment leads to doubt rather than confidence in each of these six propositions, and hence doubt rather than confidence in the use of monetary aggregate targets.

Suggested Citation

Friedman, Benjamin M., Lessons from the 1979-1982 Monetary Policy Experiment (February 1984). NBER Working Paper No. w1272. Available at SSRN: https://ssrn.com/abstract=321320

Benjamin M. Friedman (Contact Author)

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