Keywords: Monetary policy rules, inflation, unemployment, Greenbook forecasts
Abstract: The nature of monetary policy during the 1970s is evaluated
through the lens of a forward-looking Taylor rule based
on perceptions regarding the outlook for inflation and
unemployment at the time policy decisions were made.
The evidence suggests that policy during the 1970s was
essentially indistinguishable from a systematic, activist,
forward-looking approach such as is often identified with
good policy advice in theoretical and econometric policy
evaluation research. This points to the unpleasant possibility
that the policy errors of the 1970s occured despite the use
of a seemingly desirable policy approach. Though the resulting
activist policies could have appeared highly promising, they
proved, in retrospect, counterproductive.
Full paper (81 KB PDF)
| Full paper (378 KB Postscript)
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Last update: January 28, 2002