Examining the Monetary Causes of the Economic Slowdown (CRS Report for Congress)
| Release Date |
Revised July 20, 1982 |
| Report Number |
MB82225 |
| Authors |
Everson Hull, Economics Division |
| Source Agency |
Congressional Research Service |
| Older Revisions |
-
Premium April 5, 1982 (8 pages, $24.95)
add
|
Summary:
The economy is currently going through a difficult transition from a period of accelerating inflation to a period of more price moderate increases. Since 1955, there has been a disturbing trend in the U.S. economy, in which inflation has accelerated from a higher base after each recession. Moreover, the underlying rate of inflation has shown a tendency to continue rising through economic expansions as well as contractions. The current downturn marks the sixth recession that the U.S. has experienced since 1955 and the prospects appear good that the economy will emerge with a lower inflation rate than has been the case in these past recessions. Since March of 1980, the rate of inflation has fallen dramatically. In March through June of 1981, the annualized inflation rate as measured by the consumer price index (CPI) was at less than double-digit levels” 7.5% at an annual rate over this four-month period. The last previous four-month period of single-digit inflation rates was recorded for the period December 1977 to March 1978. In the six-month period through March 1982 the CPI has increased at an annual rate of only 3.2% During March the CPI an fell at annual rate of 3.6%, the first decline in seventeen years. However, moderation in inflation has been accompanied by high and interest volatile rates and periods of sluggish economic growth. This issue brief investigates the effects of changes in money supply growth on the current economic conditions. The results presented are based upon a statistical methodology outlined in a CRS report (N0.82-43E, March 1982) of the same title. The approach may be distinguished from most previous work along these lines in that it attempts to estimate the statistical significance of the 1979-82 deceleration in monetary growth. The resulting estimates are then employed in analyzing the timing implications of decelerating monetary growth for episodes of high and volatile interest rates, for lower inflation, and for unstable economic growth.
