Panel Session II remarks, The Great Inflation: Lessons for Central Banks

This chapter presents remarks by Deputy Governor of the European Central Bank (ECB) Lucas Papademos. He first assesses alternative views concerning the determinants of the Great Inflation by comparing the inflation performance and the conduct of monetary policy in the United States and in a number of European countries. Papademos then summarizes the key lessons for monetary policy that can be drawn from the experience of the Great Inflation in the 1970s and the subsequent period of disinflation in the 1980s, which led to the establishment of a high degree of price stability on both sides of the Atlantic. Finally, he briefly explains that the lessons of the Great Inflation are embedded in the institutional framework and the monetary policy strategy of the ECB, and have guided the conduct of the ECB's monetary policy since the launch of the euro.