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FIGURES
A Half-Century of Changes in Monetary Policy
John B. Taylor
Under Secretary of the Treasury for International Affairs
Conference in Honor of Milton FriedmanUniversity of Chicago
November 8, 2002
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U.S. Inflation FIGURE 1
-2
0
2
4
6
8
10
12
14
1 9 5 1
1 9 5 6
1 9 6 1
1 9 6 6
1 9 7 1
1 9 7 6
1 9 8 1
1 9 8 6
1 9 9 1
1 9 9 6
2 0 0 1
P e r
c e n t
Quarterly
Inflation
Smoothed Inflation
(four-quarter inflation)
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U.K. Inflation FIGURE 2
-5
0
5
10
15
20
2530
35
40
1
9 6 0
1
9 6 5
1
9 7 0
1
9 7 5
1
9 8 0
1
9 8 5
1
9 9 0
1
9 9 5
2
0 0 0
P e
r c e n t
Quarterly
Inflation
Smoothed Inflation
(four-quarter inflation)
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Australia Inflation FIGURE 3
-5
0
5
10
15
20
25
30
1
9 6 0
1
9 6 5
1
9 7 0
1
9 7 5
1
9 8 0
1
9 8 5
1
9 9 0
1
9 9 5
2
0 0 0
P e
r c e n t
Quarterly
Inflation
Smoothed Inflation
(four-quarter inflation)
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Canada Inflation FIGURE 4
-5
0
5
10
15
20
1 9 6 1
1 9 6 6
1 9 7 1
1 9 7 6
1 9 8 1
1 9 8 6
1 9 9 1
1 9 9 6
2 0 0 1
P e r
c e n t
Quarterly
Inflation
Smoothed Inflation
(four-quarter inflation)
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Median Inflation 5-Year Periods by Region
FIGURE 5
0
2
4
6
8
10
12
14
16
1962-1966
1967-1971
1972-1976
1977-1981
1982-1986
1987-1991
1992-1996
1997-2001
M e d i a n I n f l a t i o n R a t e ( % p e r a n n u m )
United
StatesAfrica
Asia
Middle East
Western
EuropeWesternHemisphere
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0%
100%
200%
300%
400%
500%
0% 100% 200% 300% 400% 500%Money Growth (% per annum)
I n f l a t i o n ( % p e r a n n u m
)
Money Growth and Inflation 1971-2001
Argentina
Peru
Bolivia
FIGURE 6A
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Money Growth and Inflation 1971-2001 (close-up)
0%
50%
100%
150%
0% 50% 100% 150%
Money Growth (% per annum)
I n f l
a t i o n ( % p
e r a n n u m
)Bolivia
UruguayTurkey
Israel Chile
Mexico
Sierra Leone
Venezuela
United States
FIGURE 6B
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0
1
2
3
4
5
0 1 2 3 4 5
Inflation Rate
I n t e r e s t R a t e
Monetary Policy Responses
Older Monetary Policy
Newer Monetary Policy
Real interest rate
equals two percent
FIGURE 7
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U.S. Inflation FIGURE 8
-2
0
2
4
6
8
10
12
14
1 9 5 1
1 9 5 6
1 9 6 1
1 9 6 6
1 9 7 1
1 9 7 6
1 9 8 1
1 9 8 6
1 9 9 1
1 9 9 6
2 0 0 1
P e r c e n t
Quarterly
Inflation
Smoothed Inflation
(four-quarter inflation)
Q1 1968: Fed
Funds rate
was 4.8%
Q2 1989: FedFunds rate
was 9.7%
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U.K. Inflation FIGURE 9
-5
0
5
1015
20
2530
35
40
1
9 6 0
1
9 6 5
1
9 7 0
1
9 7 5
1
9 8 0
1
9 8 5
1
9 9 0
1
9 9 5
2
0 0 0
P e
r c e n t
1971: Overnightinterest rate
was 6%
Quarterly
Inflation
Smoothed Inflation
(four-quarter inflation)
1990: Overnight
interest rate
was 15%
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Australia Inflation FIGURE 10
-5
0
5
10
15
20
25
30
1
9 6 0
1
9 6 5
1
9 7 0
1
9 7 5
1
9 8 0
1
9 8 5
1
9 9 0
1
9 9 5
2
0 0 0
P e r c e n t
1969: Overnight
interest rate
was 4.5%
1990: Overnight
interest rate
was 17%
Quarterly
Inflation
Smoothed Inflation
(four-quarter inflation)
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Canada Inflation FIGURE 11
-5
0
5
10
15
20
1 9
6 1
1 9
6 6
1 9
7 1
1 9
7 6
1 9
8 1
1 9
8 6
1 9
9 1
1 9
9 6
2 0
0 1
P e r c
e n t
1972: Overnight
interest ratewas 5%
1989: Overnight
interest rate
was 12%
Quarterly
Inflation
Smoothed Inflation
(four-quarter inflation)
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U.S. Real GDP FIGURE 12
0
1750
3500
5250
7000
8750
10500
1 9 5 0
1 9 5 5
1 9 6 0
1 9 6 5
1 9 7 0
1 9 7 5
1 9 8 0
1 9 8 5
1 9 9 0
1 9 9 5
2 0 0 0
B i l l i o n s o f 1
9 9 6 D o l l a r s
-6
-4
-2
0
2
4
6
Percent deviation
from trend (right axis)
Real GDP andTrend GDP (left axis)
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U.K. Real GDP FIGURE 13
0
40
80
120
160
200
240
1 9 6 0
1 9 6 5
1 9 7 0
1 9 7 5
1 9 8 0
1 9 8 5
1 9 9 0
1 9 9 5
2 0 0 0
B i l l i o n
s o f 1 9 9 5
B r i t i s h P o
u n d s
-6%
-4%
-2%
0%
2%
4%
6%
Percent deviation
from trend (right axis)
Real GDP andTrend GDP (left axis)
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Australia Real GDP FIGURE 14
0
30
60
90
120
150
180
1 9 6 0
1 9 6 5
1 9 7 0
1 9 7 5
1 9 8 0
1 9 8 5
1 9 9 0
1 9 9 5
2 0 0 0
B i l l i o n s o f 2 0 0
0 A u s t r a l i a n $
-6%
-4%
-2%
0%
2%
4%
6%
Percent deviation
from trend (right axis)
Real GDP andTrend GDP (left axis)
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Canada Real GDP FIGURE 15
0
200
400
600
800
1,000
1,200
1 9 6 1
1 9 6 6
1 9 7 1
1 9 7 6
1 9 8 1
1 9 8 6
1 9 9 1
1 9 9 6
2 0 0 1
B i l l i o n s o
f 1 9 9 5 C $
-6%
-4%
-2%
0%
2%
4%
6%
Percent deviation
from trend (right axis)
Real GDP andTrend GDP (left axis)
