The 1971-1974 Controls Program and The Price Level: An Econometric Post-Mortem
Alan S. Blinder, William J. Newton
NBER Working Paper No. 279 (Also Reprint No. r0210)
This paper provides new empirical evidence on the effects of the Nixon wageâ€”price controls on the price level. The major new wrinkle is that the controls are treated as a quantitative (rather than just a qualitative) phenomenon through the use of a specially-constructed series indicating the fraction of the economy that was controlled. According to the estimates, by February 1974controls had lowered the non-food non-energy price level by 3â€”4 percent. After that point, and especially after controls ended in April 1974, a period of rapid 'catch up' inflation eroded the gains that had been achieved, leaving the price level from zero to 2 percent below what it would have been in the absence of controls. The dismantling of controls can thus account for most of the burst of 'double digit' inflation in non-food and non-energy prices during 1974.
Published: Blinder, Alan S. and Newton, William J. "The 1971-1974 Controls Program andthe Price Level: An Econometric Post-Mortem." Journal of Monetary Economics, Vol. 8, No. 1, (July 1981), pp. 1-23.