Monetary Policy Division
D-60431 Frankfurt am Main
NBER Working Papers and Publications
|June 2013||Opting Out of the Great Inflation: German Monetary Policy after the Breakdown of Bretton Woods|
with Andreas Beyer, Vitor Gaspar, Otmar Issing
in The Great Inflation: The Rebirth of Modern Central Banking, Michael D. Bordo and Athanasios Orphanides, editors
This chapter explains the monetary targeting framework followed by the German Bundesbank from 1974 to 1998, and relates the Bundesbank's success in maintaining price stability and in anchoring inflation expectations to its strategy. The goal is to provide a historical account of the conduct of monetary policy, focusing especially on the first ten years of monetary targeting, from 1975 until the middle of the 1980s, when price stability was virtually reached in Germany.
|December 2008||Opting Out of the Great Inflation: German Monetary Policy After the Break Down of Bretton Woods|
with Andreas Beyer, Vitor Gaspar, Otmar Issing: w14596
During the turbulent 1970s and 1980s the Bundesbank established an outstanding reputation in the world of central banking. Germany achieved a high degree of domestic stability and provided safe haven for investors in times of turmoil in the international financial system. Eventually the Bundesbank provided the role model for the European Central Bank. Hence, we examine an episode of lasting importance in European monetary history. The purpose of this paper is to highlight how the Bundesbank monetary policy strategy contributed to this success. We analyze the strategy as it was conceived, communicated and refined by the Bundesbank itself. We propose a theoretical framework (following Söderström, 2005) where monetary targeting is interpreted, first and foremost, as a commitment device. In ou...