the "Volcker shock" in U.S. monetary policy
E2014
The "Volcker shock" in U.S. monetary policy refers to the dramatic interest rate hikes and tight monetary stance of the early 1980s aimed at breaking entrenched inflation, which triggered a deep recession but ultimately restored price stability and reshaped central banking practice.
Observed surface forms (1)
| Surface form | Occurrences |
|---|---|
| Volcker shock | 0 |
Statements (49)
| Predicate | Object |
|---|---|
| instanceOf |
disinflationary policy episode
ⓘ
monetary policy event ⓘ |
| appliedBy |
Federal Reserve System
ⓘ
surface form:
Federal Reserve
|
| characterizedBy |
contraction of money growth
ⓘ
high nominal interest rates ⓘ high real interest rates ⓘ sharp interest rate hikes ⓘ |
| country |
United States of America
ⓘ
surface form:
United States
|
| criticizedFor |
causing unnecessary output losses
ⓘ
disproportionate impact on blue-collar workers ⓘ disproportionate impact on indebted farmers ⓘ |
| economicConsequence |
deep recession
ⓘ
farm sector distress ⓘ high unemployment ⓘ housing market downturn ⓘ increased bankruptcies ⓘ manufacturing sector contraction ⓘ |
| endTime | 1982 ⓘ |
| followedBy | Great Moderation ⓘ |
| inflationRateAfter | low single digits by mid-1980s ⓘ |
| inflationRateBefore | above 10 percent ⓘ |
| ledBy |
Paul A. Volcker
ⓘ
surface form:
Paul Volcker
|
| longTermImpact |
contributed to adoption of inflation targeting abroad
ⓘ
entrenched anti-inflation norm in U.S. policy ⓘ influenced global central banking practice ⓘ strengthened central bank credibility ⓘ |
| mainGoal |
reduce high inflation
ⓘ
restore price stability ⓘ |
| namedAfter |
Paul A. Volcker
ⓘ
surface form:
Paul Volcker
|
| peakFederalFundsRate | around 20 percent in 1980-1981 ⓘ |
| policyFrameworkChange |
greater emphasis on controlling inflation
ⓘ
reduced tolerance for inflation ⓘ shift toward monetary aggregate targeting ⓘ |
| policyInstrument |
federal funds rate
ⓘ
monetary aggregate targeting ⓘ reserve targeting ⓘ |
| policyStance | tight monetary policy ⓘ |
| positionOfLeader | Chair of the Federal Reserve ⓘ |
| praisedFor |
decisively ending the Great Inflation
ⓘ
restoring Federal Reserve credibility ⓘ |
| precededBy | Great Inflation ⓘ |
| reason |
double-digit inflation in the late 1970s
ⓘ
entrenched inflation expectations ⓘ |
| socialConsequence | public protests against high interest rates ⓘ |
| startTime | 1979 ⓘ |
| underlyingTheory |
expectations-augmented Phillips curve
ⓘ
monetarism ⓘ rational expectations ⓘ |
| unemploymentPeak | about 10.8 percent in 1982 ⓘ |
Referenced by (1)
Full triples — surface form annotated when it differs from this entity's canonical label.