J. Bradford DeLong
The 1980s began with the Volcker disinflation: Federal Reserve Chair Paul Volcker's attempt to restore confidence in the inflation-fighting commitment of the Federal Reserve and to reduce inflation from near 10 percent per year to low levels.
The Volcker disinflation was successful, but at a cost: the steepest recession of the post-WWII era, and unemployment that peaked near 10%.
The Volcker disinflation was followed by a recovery that was not as strong as it might have been because the Reagan deficits reduced the rate of capital accumulation. The short Gulf War recession at the end of the 1980s was followed by another recovery, this time leading to a balanced federal budget, and to inflation under 2 percent per year and unemployment under 5 percent.
|Inflation 1960-Present Unemployment 1960-Present Phillips Curve Growth and Fluctuations, 1980-1998 Long-Run Growth|
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