"We found that decisions by the Federal Reserve
to reduce aggregate demand to lower inflation led
to substantial and sustained drops in industrial production"
"We found seven occasions in the postwar era when the Federal Reserve
deliberately reduced aggregate demand because the prevailing rate of inflation
was deemed unacceptable:
October 1947
September 1955
December 1968
April 1974
August 1978
October 1979
December 1988
"in the absence of monetary policy shocks, industrial
production would have risen, rather than fallen as it actually did, in 1949, 1970,
1979–82, and 1990. In both 1957 and 1974, output would still have fallen in the
absence of the monetary policy changes, but by much less. "
"Averaged over the 11 downturn years, industrial production
would have been virtually constant in the absence of monetary shocks,
rather than falling over 4 percent."
" This suggests that contractionary monetary shocks account for
a substantial share of postwar recessions"
"there were monetary policy shocks in all but two postwar
downturns (1953 and 1960"----------------------------
study pre dates 2001 recession
------------------------------------
Table 6
Contribution of Monetary Shocks
Year of Real
Decline
Change in
Industrial
Production Date of Monetary Shock
Change in Industrial
Production Without
Monetary Shocks
1949
24.2% Oct. 1947 1.8%
1953
25.0% — 25.0%
1957
27.0% Sept. 1955 21.0%
1960
26.6% — 26.6%
1970
24.0% Dec. 1968 1.8%
1974
28.0% Apr. 1974 25.5%
1979–1982
29.6% Aug. 1978 and Oct. 1979 9.3%
1990
22.1% Dec. 1988 3.6%
Avg. of 11 Years
24.2% 20.1%
Notes: The change in industrial production without monetary shocks is the
