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Measuring Price-Level Uncertainty and Instability in the U.S., 1850-2012

Author

Listed:
  • Timothy Cogley

    (New York University)

  • Thomas J. Sargent

    (New York University and Hoover Institution)

Abstract
We use a flexible statistical model with stochastic volatilities to measure price level uncertainty and instability in the U.S. over the period 1850-2012. Major outbreaks associated with the Civil War, the two World Wars and Great Depression, and the Great Inflation and Great Recession alternate with three great price-level moderations, one near the turn of 20th century, another under Bretton Woods, and a third in the 1990s. Because periods of high and low volatility occur both before and after the Second World War, there is no evidence that the price level was systematically more stable or less uncertain in either era. Moderations sometimes involved a link to gold, but the experience of the 1990s proves that a well-managed fiat regime can achieve the same end.

Suggested Citation

  • Timothy Cogley & Thomas J. Sargent, 2014. "Measuring Price-Level Uncertainty and Instability in the U.S., 1850-2012," Working Papers 2014-33, Economic Research Institute, Bank of Korea.
    • Handle: RePEc:bok:wpaper:1433
    as

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    File URL: http://papers.bok.or.kr/RePEc_attach/wpaper/english/wp-2014-33.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Price stability; inflation uncertainty; deflation risk; postwar stabilization; nonlinear signal extraction;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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