NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Great Inflation in the United States and the United Kingdom: Reconciling Policy Decisions and Data Outcomes

Riccardo DiCecio, Edward Nelson

NBER Working Paper No. 14895
Issued in April 2009
NBER Program(s):   ME

We argue that the Great Inflation experienced by both the United Kingdom and the United States in the 1970s has an explanation valid for both countries. The explanation does not appeal to common shocks or to exchange rate linkages, but to the common doctrine underlying the systematic monetary policy choices in each country. The nonmonetary approach to inflation control that was already influential in the United Kingdom came to be adopted by the United States during the 1970s. We document our position by examining official policymaking doctrine in the United Kingdom and the United States in the 1970s, and by considering results from a structural macroeconomic model estimated using U.K. data.

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Published: The Great Inflation in the United States and the United Kingdom: Reconciling Policy Decisions and Data Outcomes, Riccardo DiCecio, Edward Nelson, in The Great Inflation: The Rebirth of Modern Central Banking (2013), University of Chicago Press (p. 393 - 438)

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