Political Pressures on Monetary Policy During the US Great Inflation

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 inflat...

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Bibliographic Details
Published inAmerican economic journal. Macroeconomics Vol. 4; no. 2; pp. 33 - 64
Main Author Weise, Charles L.
Format Journal Article
LanguageEnglish
Published Pittsburgh American Economic Association 01.04.2012
Subjects
Committees
Economic growth rate
Economic policy
Economic recessions
Economic statistics
Federal funds rate
Federal Reserve Bank
Federal Reserve monetary policy
GDP
Gross Domestic Product
Hypotheses
Inflation
Inflation rates
Interest rates
Macroeconomics
Meetings
Monetary policy
Monetary theory
Political behavior
Political economy
Politics
Studies
Unemployment
United States > US
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Summary: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.
ISSN:1945-7707
1945-7715
DOI:10.1257/mac.4.2.33