What happened during the Great Inflation?

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Political Constraints on Monetary Policy During the Great Inflation, 10-09 final.pdf (388 KB)

Levin and Taylor have a new paper arguing that the Fed’s stop-go policies were the main cause of rising inflation during the 1970s. They argue that political factors are the most likely reason for these policies. I explore the political constraints facing the Fed in this paper.

Happy (belated) non-borrowed reserves targeting day

How come none of the economics blogs I follow regularly noted that yesterday was the 30th anniversary of Paul Volcker's announcement that the Fed would begin targeting non-borrowed reserves rather than the federal funds rate? This decision was the beginning of the end of the Great Inflation that wracked the economy in the 1970s. It was such a historical milestone that today no respectable macroeconomist will run a regression on post-war US data without acknowledging the likelihood of a structural break in 1979:Q4.