{"id":390141,"date":"2010-03-04T16:40:24","date_gmt":"2010-03-04T21:40:24","guid":{"rendered":"tag:www.economist.com,21005178"},"modified":"2010-03-04T16:40:24","modified_gmt":"2010-03-04T21:40:24","slug":"once-bitten-twice-hawkish","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/390141","title":{"rendered":"Once bitten, twice hawkish"},"content":{"rendered":"

GERMANY’S interwar experience with hyperinflation famously created a political climate amenable to rise of Adolph Hitler and generated sufficient national trauma that the German central bank (and its descendent, the ECB) has ever since focused first, second, and last on keeping inflation well in check. As it happens, it seems that it doesn’t take hyperinflation to scare a country straight<\/a> where inflation is concerned:<\/p>\n

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Japan suffered a very high inflation rate in 1973-74. The CPI inflation rate rose to near 30% in 1974, the highest rate in the postwar Japanese history after the chaotic hyperinflation following the end of the Second World War. Traditionally, the oil crisis is blamed for the 1973-74 high inflation. However, due to monetary policy decisions in 1972-73, the inflation rate had already exceeded 10% before the onset of the oil crisis in October 1973. These decisions include the interest rate cut of June 1972 and the interest rate hike of April 1973, which in retrospect proved too small. Concern about the rapid yen appreciation produced political pressure on the Bank of Japan to continue easing. The Bank of Japan came out of the Great Inflation of 1973 with a stronger voice. The Bank successfully argued that its recommendation to tighten monetary policy should not be overruled or the high inflation would be repeated. By this logic, the Bank of Japan obtained \/de facto\/ independence after 1975. When faced with the next economic recovery in 1979, again accompanied by oil price increases, the Bank of Japan was able to tighten monetary policy and to contain the inflation rate under 10 percent. The interest rate in the 1972-75 period was well below, by as much as 25 percentage points in 1973, the interest rate suggested by a modified monthly Taylor rule regression.<\/p>\n<\/blockquote>\n

The pain of inflation empowered the Japanese central bank, which has since proved more able (and extremely willing) to fight inflation. This, even though the 30% annual rate of price increase was well, well below the extreme rates of inflation seen in Germany. And clearly, this inflation hawkery has persisted<\/a> to today, despite what is now two decades of economic stagnation. It’s interesting that economic weakness doesn’t seem to have the same scarring effect. Or, it seems not to have it in a way that reduces the inflation-fighting commitment (or the influence) of the central bank.<\/p>\n","protected":false},"excerpt":{"rendered":"

GERMANY’S interwar experience with hyperinflation famously created a political climate amenable to rise of Adolph Hitler and generated sufficient national trauma that the German central bank (and its descendent, the ECB) has ever since focused first, second, and last on keeping inflation well in check. As it happens, it seems that it doesn’t take hyperinflation […]<\/p>\n","protected":false},"author":4534,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-390141","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/390141","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/4534"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=390141"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/390141\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=390141"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=390141"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=390141"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}