The reform of october 1979: how it happened and why

This study offers a historical review of the monetary policy reform of October 6, 1979, and discusses the influences behind it and its significance. We lay out the record from the start of 1979 through the spring of 1980
This study offers a historical review of the monetary policy reform of October 6, 1979, and discusses the influences behind it and its significance. We lay out the record from the start of 1979 through the spring of 1980, relying almost exclusively upon contemporaneous sources, including the recently released transcripts of Federal Open Market Committee (FOMC) meetings during 1979. We then present and discuss in detail the reasons for the FOMC's adoption of the reform and the communications challenge presented to the Committee during this period. Further, we examine whether the essential characteristics of the reform were consistent with monetarism, new, neo, or old-fashioned Keynesianism, nominal income targeting, and inflation targeting. The record suggests that the reform was adopted when the FOMC became convinced that its earlier gradualist strategy using finely tuned interest rate moves had proved inadequate for fighting inflation and reversing inflation expectations. The new plan had to break dramatically with established practice, allow for the possibility of substantial increases in short-term interest rates, yet be politically acceptable, and convince financial markets participants that it would be effective. The new operating procedures were also adopted for the pragmatic reason that they would likely succeed. JEL Klassifikation: E52, E58, E61, E65. 
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Metadaten
Author:David E. Lindsey, Athanasios Orphanides, Robert H. Rasche
URN:urn:nbn:de:hebis:30-10777
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2005,01
Series (Serial Number):CFS working paper series (2005, 01)
Document Type:Working Paper
Language:English
Year of Completion:2005
Year of first Publication:2005
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2005/06/13
Tag:FOMC; Federal Reserve; Paul Volcker; monetary reform; operating procedures
SWD-Keyword:Geldpolitik; Geschichte 1979-1980; Reform; USA / Board of Governors of the Federal Reserve System
Issue:December 2004
HeBIS PPN:197419585
Institutes:Center for Financial Studies (CFS)
Dewey Decimal Classification:330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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