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Federal Reserve Bank of St. Louis
Working Papers
The great inflation in the United States and the United Kingdom: reconciling policy decisions and data outcomes
Riccardo DiCecio
Edward Nelson
Abstract

We argue that the Great Inflation experienced by both the United Kingdom and the United States in the 1970s has an explanation valid for both countries. The explanation does not appeal to common shocks or to exchange rate linkages, but to the common doctrine underlying the systematic monetary policy choices in each country. The nonmonetary approach to inflation control that was already influential in the United Kingdom came to be adopted by the United States during the 1970s. We document our position by examining official policymaking doctrine in the United Kingdom and the United States in the 1970s, and by considering results from a structural macroeconomic model estimated using U.K. data.


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Riccardo DiCecio & Edward Nelson, The great inflation in the United States and the United Kingdom: reconciling policy decisions and data outcomes, Federal Reserve Bank of St. Louis, Working Papers 2009-015, 2009.
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Keywords: Inflation (Finance) ; Great Britain
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