NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

What Remains from the Volcker Experiment?

Benjamin M. Friedman

NBER Working Paper No. 11346
Issued in May 2005
NBER Program(s):   ME

Under conventional representations of economic policymaking, any innovation is either (1) a change in the objectives that policymakers are seeking to achieve, (2) a change in the choice of policy instrument, or (3) a change in the way auxiliary aspects of economic activity are used to steer policy in the context of time lags.

Most public discussion of the 1979 Volcker experiment at the time, and likewise most of the subsequent academic literature, emphasized either the role of quantitative targets for money growth (3) or the use of an open market operating procedure based on a reserves quantity rather than a short-term interest rate (2). With time, however, neither has survived as part of U.S. monetary policymaking.

What remains is the question of whether 1979 brought a new, greater weight on the Federal Reserve’s objective of price stability vis-a-vis its objective of output growth and high employment (1). That is certainly one interpretation of the historical record. But the historical evidence is also consistent with the view that the 1970s were exceptional, rather than that the experience since 1979 has differed from what went before as a whole.

download in pdf format
   (134 K)

email paper

This paper is available as PDF (134 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w11346

Users who downloaded this paper also downloaded these:
Goodfriend and King w11562 The Incredible Volcker Disinflation
Friedman w8972 The Use and Meaning of Words in Central Banking: Inflation Targeting, Credibility, and Transparency
Blanchard w1326 The Lucas Critique and the Volcker Deflation
Mussa, Volcker, and Tobin Monetary Policy
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us