Bretton Woods and the Great Inflation / Michael D. Bordo, Barry Eichengreen.

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Bordo, Michael D

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w14532.Publication details: Cambridge, Mass. National Bureau of Economic Research 2008.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: In this paper we show that the acceleration of inflation in the United States after 1965 reflected a shift in perceived responsibility for managing the country's international financial position. Prior to 1965 this responsibility was lodged primarily with the Fed, whose policies resembled those of a central bank playing by the gold standard rules of the game. Over time, however, this responsibility was increasingly assumed by the Treasury, while the Federal Reserve acquired increasing room for maneuver as a result of the adoption of the Interest Equalization Tax and other policies with effects analogous to capital controls. Once the external constraint shaped policy less powerfully, the Fed pursued other goals more aggressively, resulting in more inflationary pressure. We document these points with a quantitative and qualitative analysis of the minutes of the Federal Open Market Committee.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w14532 (Browse shelf(Opens below))	Not For Loan

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December 2008.

In this paper we show that the acceleration of inflation in the United States after 1965 reflected a shift in perceived responsibility for managing the country's international financial position. Prior to 1965 this responsibility was lodged primarily with the Fed, whose policies resembled those of a central bank playing by the gold standard rules of the game. Over time, however, this responsibility was increasingly assumed by the Treasury, while the Federal Reserve acquired increasing room for maneuver as a result of the adoption of the Interest Equalization Tax and other policies with effects analogous to capital controls. Once the external constraint shaped policy less powerfully, the Fed pursued other goals more aggressively, resulting in more inflationary pressure. We document these points with a quantitative and qualitative analysis of the minutes of the Federal Open Market Committee.