DID FEDERAL RESERVE POLICY FROM 1979 TO 1982 HAVE “MISERABLE RESULTS”? In an op-ed article in the Wall Street Journal (July 18), Professor Alan Blinder, a former Vice Chairman of the Federal Reserve, says that: “The Fed claimed to be using [Milton] Friedman’s money growth rule during the tumultuous disinflation of 1979-82—with miserable results.” I was astonished by this sentence. Not by the thesis of the article, which argues that the Federal Reserve should not follow a rule that the money supply should increase by a fixed percentage every year.There’s a lot of controversy about whether the Fed should follow such a rule. No, I was astonished by the characterization of the period from 1979 to 1982 as one of “miserable results”. Most everything in macroeconomics is controversial, but one of the things that I have thought was pretty much agreed on was that the economic results from 1979 to 1982 were a notable success. Further, I had thought that it is generally agreed that much of the credit for that success belongs to Paul Volcker, who was the Chairman of the Fed during that period.

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