Working Paper: NBER ID: w0279
Authors: Alan S. Blinder; William J. Newton
Abstract: This paper provides new empirical evidence on the effects of the Nixon wage-price controls on the price level. The major new wrinkle is that the controls are treated as a quantitative (rather than just a qualitative) phenomenon through the use of a specially-constructed series indicating the fraction of the economy that was controlled. According to the estimates, by February 1974controls had lowered the non-food non-energy price level by 3-4 percent. After that point, and especially after controls ended in April 1974, a period of rapid 'catch up' inflation eroded the gains that had been achieved, leaving the price level from zero to 2 percent below what it would have been in the absence of controls. The dismantling of controls can thus account for most of the burst of 'double digit' inflation in non-food and non-energy prices during 1974.
Keywords: Wage-price controls; Inflation; Econometric analysis
JEL Codes: E31; E58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Nixon wage-price controls (E64) | nonfood nonenergy price level (E30) |
| removal of Nixon wage-price controls (E64) | price level (E30) |
| Nixon wage-price controls (E64) | inflation rates (E31) |
| removal of Nixon wage-price controls (E64) | catch-up inflation (E31) |