Political Pressures on Monetary Policy during the US Great Inflation
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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)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.4.2.33Additional Materials
JEL Classification
- 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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