1The FOMC is responsible for the actions of U.S. monetary policy through open market operations. 2A sizeable literature explores regression estimates of U.S. policy responses over postwar samples, including Judd and Rudebusch (1998), Taylor (1999), Romer and Romer (2002), and Nelson (2005). 3The number of combinations is calculated as P5 5! i=1 i!(5−i)! = 31. Inconclusive calibration exercises of two competing theories of the Great Inflation are discussed in Collard and Dellas (2004). Surveys of alternative interpretations of U.S. inflation in the 1970s include Velde (2004) and Nelson (2005). Various interpretations were explored in presentations at the NBER's “The Great Inflation Conference” in September 2008.
19Goldfeld (1976) indicates that a representative money demand model of the early 1970s generates larger prediction errors, with an out-of-sample RMSE of 6.3 percentage points from 1974Q1 to 1975Q2.
20It might be noted that this, and similar real-time MOD quotes, differ considerably from the retrospective Per Jacobsson Lecture, often cited by policy historians, where Burns (1979) suggests: “As the Federal Reserve, for example, kept testing and probing the limits of its freedom to undernourish the inflation, it repeatedly evoked violent criticism from both the Executive Branch and the Congress.” 21The Subcommittee was chaired by Governor Holland, with Governor Wallich, President Balles (Federal Reserve Bank of San Francisco), and President Morris (Federal Reserve Bank of Boston) as members.
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Collard, F., Dellas, H., 2004. The great inflation of the 1970s. European Central Bank working paper 336, April.
DeLong, B., 1997. America's only peacetime inflation: the 1970s. In: Romer, C., Romer, D. (Eds.) Reducing Inflation: Motivation and Strategy. Chicago University Press, Chicago, 247-76.
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