The Experts below are selected from a list of 288 Experts worldwide ranked by ideXlab platform
Lutz Kilian - One of the best experts on this subject based on the ideXlab platform.
-
oil price shocks monetary policy and Stagflation
RBA Annual Conference Volume (Discontinued), 2010Co-Authors: Lutz KilianAbstract:One of the central questions in recent macroeconomic history is to what extent monetary policy as opposed to oil price shocks contributed to the Stagflation of the 1970s. Understanding what went wrong in the 1970s is the key to learning from the past. One explanation explored in Barsky and Kilian (2002) is that worldwide shifts in monetary policy regimes not related to the oil market played a major role in causing both the major oil price increases of the 1970s and Stagflation in many economies. A competing view exemplified by Bernanke, Gertler and Watson (1997) is that the oil price shocks of the 1970s and 1980s arose exogenously with respect to global macroeconomic conditions, but were propagated by the reaction of monetary policy makers, causing Stagflation in the process. This paper reviews the evidence for these two main explanations, interprets recent events in light of this evidence, and outlines implications for monetary policy.(This abstract was borrowed from another version of this item.)
-
oil price shocks monetary policy and Stagflation
2009Co-Authors: Lutz KilianAbstract:One of the central questions in recent macroeconomic history is to what extent monetary policy as opposed to oil price shocks contributed to the Stagflation of the 1970s. Understanding what went wrong in the 1970s is the key to learning from the past. One explanation explored in Barsky and Kilian (2002) is that worldwide shifts in monetary policy regimes not related to the oil market played a major role in causing both the major oil price increases of the 1970s and Stagflation in many economies. A competing view exemplified by Bernanke, Gertler and Watson (1997) is that the oil price shocks of the 1970s and 1980s arose exogenously with respect to global macroeconomic conditions, but were propagated by the reaction of monetary policy makers, causing Stagflation in the process. This paper reviews the evidence for these two main explanations, interprets recent events in light of this evidence, and outlines implications for monetary policy.
-
do we really know that oil caused the great Stagflation a monetary alternative
Nber Macroeconomics Annual, 2001Co-Authors: Robert Barsky, Lutz KilianAbstract:This paper argues that major oil price increases were not nearly as essential a part of the causal mechanism that generated the Stagflation of the 1970s as is often thought. There is neither a theoretical presumption that oil supply shocks are Stagflationary nor robust empirical evidence for this view. In contrast, we show that monetary expansions and contractions can generate Stagflation of realistic magnitude even in the absence of supply shocks. Furthermore, monetary fluctuations help to explain the historical movements of the prices of oil and other commodities, including the surge in the prices of industrial commodities that preceded the 1973-1974 oil price increase. Thus, they can account for the striking coincidence of major oil price increases and worsening Stagflation.
-
a monetary explanation of the great Stagflation of the 1970s
National Bureau of Economic Research, 2000Co-Authors: Robert Barsky, Lutz KilianAbstract:The origins of Stagflation and the possibility of its recurrence continue to be an important concern among policymakers and in the popular press. It is common to associate the origins of the Great Stagflation of the 1970s with the two major oil price increases of 1973/74 and 1979/80. This paper argues that oil price increases were not nearly as essential a part of the causal mechanism generating Stagflation as is often thought. We provide a model that can explain the bulk of Stagflation by monetary expansions and contractions without reference to supply shocks. Monetary fluctuations also help to explain variations in the price of oil (and other commodities) and help to account for the striking coincidence of major oil price increases and worsening Stagflation. In contrast, there is no theoretical presumption that oil supply shocks are Stagflationary. In particular, we show that oil supply shocks may quite plausibly lower the GDP deflator and that there is little independent evidence that oil supply shocks actually raised the deflator (as opposed to the CPI). The oil supply shock view also fails to explain the dramatic surge in the price of other industrial commodities that preceded the 1973/74 oil price increase and the fact that increases in industrial commodity prices lead oil price increases in the OPEC period.
John C. Williams - One of the best experts on this subject based on the ideXlab platform.
-
the decline of activist stabilization policy natural rate misperceptions learning and expectations
Journal of Economic Dynamics and Control, 2005Co-Authors: Athanasios Orphanides, John C. WilliamsAbstract:We develop an estimated model of the US economy in which agents form expectations by continually updating their beliefs regarding the behaviour of the economy and monetary policy. We explore the effects of policy-makers' misperceptions of the natural rate of unemployment during the late 1960s and 1970s on the formation of expectations and macroeconomic outcomes. We find that the combination of monetary policy directed at tight stabilization of unemployment near its perceived natural rate and large real-time errors in estimates of the natural rate uprooted here-to-fore quiescent inflation expectations and contributed to poor macroeconomic performance. Had monetary policy reacted less aggressively to perceived unemployment gaps, inflation expectations would have remained anchored and the Stagflation of the 1970s would have been avoided. Indeed, we find that less activist policies would have been more effective at stabilizing both inflation and unemployment. We argue that policy-makers, learning from the experience of the 1970s, eschewed activist policies in favour of policies that concentrated on the achievement of price stability, contributing to the subsequent improvements in macroeconomic performance of the US economy.(This abstract was borrowed from another version of this item.)
-
imperfect knowledge inflation expectations and monetary policy
Social Science Research Network, 2002Co-Authors: Athanasios Orphanides, John C. WilliamsAbstract:This paper investigates the role that imperfect knowledge about the structure of the economy plays in the formation of expectations, macroeconomic dynamics, and the ecient formulation of monetary policy. Economic agents rely on an adaptive learning technology to form expectations and continuously update their beliefs regarding the dynamic structure of the economy based on incoming data. The process of perpetual learning introduces an additional layer of dynamic interactions between monetary policy and economic outcomes. We nd that policies that would be ecient under rational expectations can perform poorly when knowledge is imperfect. In particular, policies that fail to maintain tight control over inflation are prone to episodes in which the public’s expectations of inflation become uncoupled from the policy objective and Stagflation results, in a pattern similar to that experienced in the United States during the 1970s. More generally, we show that policy should respond more aggressively to inflation under imperfect knowledge than under perfect knowledge.
-
imperfect knowledge inflation expectations and monetary policy
National Bureau of Economic Research, 2002Co-Authors: Athanasios Orphanides, John C. WilliamsAbstract:This paper investigates the role that imperfect knowledge about the structure of the economy plays in the formation of expectations, macroeconomic dynamics, and the efficient formulation of monetary policy. Economic agents rely on an adaptive learning technology to form expectations and to update continuously their beliefs regarding the dynamic structure of the economy based on incoming data. The process of perpetual learning introduces an additional layer of dynamic interaction between monetary policy and economic outcomes. We find that policies that would be efficient under rational expectations can perform poorly when knowledge is imperfect. In particular, policies that fail to maintain tight control over inflation are prone to episodes in which the public's expectations of inflation become uncoupled from the policy objective and Stagflation results, in a pattern similar to that experienced in the United States during the 1970s. Our results highlight the value of effective communication of a central bank's inflation objective and of continued vigilance against inflation in anchoring inflation expectations and fostering macroeconomic stability.
Athanasios Orphanides - One of the best experts on this subject based on the ideXlab platform.
-
the decline of activist stabilization policy natural rate misperceptions learning and expectations
Journal of Economic Dynamics and Control, 2005Co-Authors: Athanasios Orphanides, John C. WilliamsAbstract:We develop an estimated model of the US economy in which agents form expectations by continually updating their beliefs regarding the behaviour of the economy and monetary policy. We explore the effects of policy-makers' misperceptions of the natural rate of unemployment during the late 1960s and 1970s on the formation of expectations and macroeconomic outcomes. We find that the combination of monetary policy directed at tight stabilization of unemployment near its perceived natural rate and large real-time errors in estimates of the natural rate uprooted here-to-fore quiescent inflation expectations and contributed to poor macroeconomic performance. Had monetary policy reacted less aggressively to perceived unemployment gaps, inflation expectations would have remained anchored and the Stagflation of the 1970s would have been avoided. Indeed, we find that less activist policies would have been more effective at stabilizing both inflation and unemployment. We argue that policy-makers, learning from the experience of the 1970s, eschewed activist policies in favour of policies that concentrated on the achievement of price stability, contributing to the subsequent improvements in macroeconomic performance of the US economy.(This abstract was borrowed from another version of this item.)
-
imperfect knowledge inflation expectations and monetary policy
Social Science Research Network, 2002Co-Authors: Athanasios Orphanides, John C. WilliamsAbstract:This paper investigates the role that imperfect knowledge about the structure of the economy plays in the formation of expectations, macroeconomic dynamics, and the ecient formulation of monetary policy. Economic agents rely on an adaptive learning technology to form expectations and continuously update their beliefs regarding the dynamic structure of the economy based on incoming data. The process of perpetual learning introduces an additional layer of dynamic interactions between monetary policy and economic outcomes. We nd that policies that would be ecient under rational expectations can perform poorly when knowledge is imperfect. In particular, policies that fail to maintain tight control over inflation are prone to episodes in which the public’s expectations of inflation become uncoupled from the policy objective and Stagflation results, in a pattern similar to that experienced in the United States during the 1970s. More generally, we show that policy should respond more aggressively to inflation under imperfect knowledge than under perfect knowledge.
-
imperfect knowledge inflation expectations and monetary policy
National Bureau of Economic Research, 2002Co-Authors: Athanasios Orphanides, John C. WilliamsAbstract:This paper investigates the role that imperfect knowledge about the structure of the economy plays in the formation of expectations, macroeconomic dynamics, and the efficient formulation of monetary policy. Economic agents rely on an adaptive learning technology to form expectations and to update continuously their beliefs regarding the dynamic structure of the economy based on incoming data. The process of perpetual learning introduces an additional layer of dynamic interaction between monetary policy and economic outcomes. We find that policies that would be efficient under rational expectations can perform poorly when knowledge is imperfect. In particular, policies that fail to maintain tight control over inflation are prone to episodes in which the public's expectations of inflation become uncoupled from the policy objective and Stagflation results, in a pattern similar to that experienced in the United States during the 1970s. Our results highlight the value of effective communication of a central bank's inflation objective and of continued vigilance against inflation in anchoring inflation expectations and fostering macroeconomic stability.
Tomas Fernandezdesevilla - One of the best experts on this subject based on the ideXlab platform.
-
growth amid a storm renault in spain during the Stagflation crisis 1974 1985
Business History, 2017Co-Authors: Tomas FernandezdesevillaAbstract:AbstractThe aim of this article is to analyse the trajectory of FASA-Renault during the Stagflation crisis. In late 1972, the Spanish government enacted the so-called Ford decrees. The intention was to stimulate specialisation in the European arena by inserting the Spanish subsidiaries within the international strategies of large transnational corporations. In doing so, the effects of the economic crisis were compounded by the restructuring of the sector. The goal is to understand how, in the midst of this situation, FASA-Renault was able to increase production and the size of its workforce, ultimately becoming the leading firm in the sector in terms of production and sales in Spain. This is remarkable, due to the fact that labour force participation in Spain fell by nearly 3 million people from 1974 to 1985. The article argues that FASA-Renault, albeit with nuances, kept its commitment to diversification, neither adopting practices inspired by the production systems of the large Japanese manufacturers no...
Shujaat Khan - One of the best experts on this subject based on the ideXlab platform.
-
drifting inflation targets and monetary Stagflation
Journal of Economic Dynamics and Control, 2014Co-Authors: Shujaat Khan, Edward S KnotekAbstract:Abstract This paper revisits the phenomenon of Stagflation. Using a standard New Keynesian dynamic, stochastic general equilibrium model, we show that Stagflation from monetary policy alone is a very common occurrence when the economy is subject to both deviations from the policy rule and a drifting inflation target. Once the inflation target is fixed, the incidence of Stagflation in the baseline model is essentially eliminated. In contrast with several other recent papers that have focused on the connection between monetary policy and Stagflation, we show that while high uncertainty about monetary policy actions can be conducive to the occurrence of Stagflation, imperfect information more generally is not a requisite channel to generate Stagflation.
-
drifting inflation targets and Stagflation
Social Science Research Network, 2012Co-Authors: Edward S Knotek, Shujaat KhanAbstract:This paper revisits the phenomenon of Stagflation. Using a standard New Keynesian dynamic, stochastic general equilibrium model, we show that Stagflation from monetary policy alone is a very common occurrence when the economy is subject to both deviations from the policy rule and a drifting inflation target. Once the inflation target is fixed, the incidence of Stagflation in the baseline model is essentially eliminated. In contrast with several other recent papers that have focused on the connection between monetary policy and Stagflation, we show that while high uncertainty about monetary policy actions can be conducive to the occurrence of Stagflation, imperfect information more generally is not a requisite channel to generate Stagflation.
-
drifting inflation targets and Stagflation
Research Papers in Economics, 2012Co-Authors: Edward S Knotek, Shujaat KhanAbstract:The 1970s provided the United States its first experience with the phenomenon of Stagflation—simultaneously high inflation and poor economic performance in terms of unemployment and GDP. Economists continue to debate the root causes of Stagflation. The conventional view is that sharp increases in the price of oil during the decade were to blame: large increases in oil prices raise inflation, which saps purchasing power from consumers and businesses and thus hurts economic activity. But a number of economists also point to a role for monetary policy in generating Stagflation, in particular through “go-stop” monetary policy: because inflation tends to move slowly, a period of accommodative monetary policy followed by a sharp tightening of policy can result in Stagflation, as output turns down quickly but inflation remains high from the “go” phase. ; This paper examines the ability of monetary policy to generate Stagflation. Using a relatively standard macroeconomic model, it shows that Stagflation arises regularly in cases where the monetary authority allows its inflation target to move around. If households and firms face great uncertainty about the monetary authority’s inflation target, this scenario is also conducive to the emergence of Stagflation—even if the inflation target actually remains unchanged. Thus, the paper finds that limiting monetary policy uncertainty and drift in the inflation target during normal times through clearly communicated, credible, and fixed inflation targets would essentially eliminate the possibility of Stagflation from monetary factors.