The Great Inflation and Early Disinflation in Japan and Germany

51 Pages Posted: 18 Sep 2007

See all articles by Edward Nelson

Edward Nelson

Board of Governors of the Federal Reserve System

Multiple version iconThere are 3 versions of this paper

Date Written: September 2007

Abstract

This paper considers the Great Inflation of the 1970s in Japan and Germany. From 1975 onward, these countries had low inflation relative to other large economies. Traditionally, this success is attributed to stronger discipline on the part of Japan and Germany's monetary authorities - for example, more willingness to accept temporary unemployment, or greater determination not to monetize government deficits. I instead attribute the success of these countries from the mid-1970s to their governments' and monetary authorities' acceptance that inflation is a monetary phenomenon. Likewise their higher inflation in the first half of the 1970s is attributable to the fact that their policymakers over this period embraced nonmonetary theories of inflation.

Keywords: Japan, Germany, Great Inflation, monetary targeting, incomes policy

JEL Classification: E52, E58, E64, E65

Suggested Citation

Nelson, Edward, The Great Inflation and Early Disinflation in Japan and Germany (September 2007). Available at SSRN: https://ssrn.com/abstract=1012703 or http://dx.doi.org/10.2139/ssrn.1012703

Edward Nelson (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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