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American Economic Journal: Macroeconomics: Vol. 4 No. 2 (April 2012)

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Political Pressures on Monetary Policy during the US Great Inflation

Article Citation

Weise, Charles L. 2012. "Political Pressures on Monetary Policy during the US Great Inflation." American Economic Journal: Macroeconomics, 4(2): 33-64.

DOI: 10.1257/mac.4.2.33

Abstract

Drawing on an analysis of Federal Open Market Committee (FOMC) documents, this paper argues that political pressures on the Federal Reserve were an important contributor to the rise in inflation in the United States in the 1970s. Members of the FOMC understood that a serious attempt to tackle inflation would generate opposition from Congress and the executive branch. Political considerations contributed to delays in monetary tightening, insufficiently aggressive anti-inflation policies, and the premature abandonment of attempts at disinflation. Empirical analysis verifies that references to the political environment at FOMC meetings are correlated with the stance of monetary policy during this period. (JEL D72, E32, E52, E58, N12)

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Authors

Weise, Charles L. (Gettysburg College)

JEL Classifications

D72: Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
E32: Business Fluctuations; Cycles
E52: Monetary Policy
E58: Central Banks and Their Policies
N12: Economic History: Macroeconomics; Growth and Fluctuations: U.S.; Canada: 1913-

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American Economic Journal: Macroeconomics


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