The pickup in the U.S. inflation rate to its highest rates in forty years has led to renewed attention being given to … the Great Inflation of the 1970s. This paper asks with regard to the Great Inflation: “How did it happen?” The answer … guided by a faulty doctrine—a nonmonetary view of inflation that perceived the concerted restraint of aggregate demand as …

We consider three ways that a monetary policy framework may employ a range for inflation outcomes: (1) ranges that … acknowledge uncertainty about inflation outcomes (uncertainty ranges), (2) ranges that define the scope for intentional deviations … of inflation from its target (operational ranges), and (3) ranges over which monetary policy will not react to inflation …

price level. The analysis compares the properties of optimal policy in regimes ranging from pure inflation targeting (IT …), to a form of weighted-average inflation targeting (WAIT), to pure price level targeting (PLT). Strategies such as WAIT …

unemployment as well as about the effect of economic activity on inflation. At the same time, a prolonged period of below …-target inflation has raised concerns about the unanchoring of inflation expectations at levels below the Federal Open Market Committee …’s inflation target. In addition, a low natural rate of interest increases the probability of hitting the effective lower bound …