MARC Record from Library of Congress

LEADER: 02700cam a22002897a 4500
001 2011657277
003 DLC
005 20110819090747.0
007 cr |||||||||||
008 110818s2011 mau sb 000 0 eng
010 $a 2011657277
040 $aDLC$cDLC
050 00 $aHB1
100 1 $aOrphanides, Athanasios.
245 10 $aMonetary policy mistakes and the evolution of inflation expectations$h[electronic resource] /$cAthanasios Orphanides, John Williams.
260 $aCambridge, MA :$bNational Bureau of Economic Research,$cc2011.
490 1 $aNBER working paper series ;$vworking paper 17080
538 $aSystem requirements: Adobe Acrobat Reader.
538 $aMode of access: World Wide Web.
500 $aTitle from PDF file as viewed on 8/18/2011.
530 $aAlso available in print.
504 $aIncludes bibliographical references.
520 3 $a"What monetary policy framework, if adopted by the Federal Reserve, would have avoided the Great Inflation of the 1960s and 1970s? We use counterfactual simulations of an estimated model of the U.S. economy to evaluate alternative monetary policy strategies. We show that policies constructed using modern optimal control techniques aimed at stabilizing inflation, economic activity, and interest rates would have succeeded in achieving a high degree of economic stability as well as price stability only if the Federal Reserve had possessed excellent information regarding the structure of the economy or if it had acted as if it placed relatively low weight on stabilizing the real economy. Neither condition held true. We document that policymakers at the time both had an overly optimistic view of the natural rate of unemployment and put a high priority on achieving full employment. We show that in the presence of realistic informational imperfections and with an emphasis on stabilizing economic activity, an optimal control approach would have failed to keep inflation expectations well anchored, resulting in high and highly volatile inflation during the 1970s. Finally, we show that a strategy of following a robust first-difference policy rule would have been highly effective at stabilizing inflation and unemployment in the presence of informational imperfections. This robust monetary policy rule yields simulated outcomes that are close to those seen during the period of the Great Moderation starting in the mid-1980s"--National Bureau of Economic Research web site.
700 1 $aWilliams, John.
710 2 $aNational Bureau of Economic Research.
830 0 $aWorking paper series (National Bureau of Economic Research : Online) ;$vworking paper no. 17080.
856 40 $uhttp://www.nber.org/papers/w17080