The Effects of General Price Controls in the United States during World War II

Abstract

This paper estimates a general equilibrium model of suppressed inflation using quarterly U.S. data for the sample period 1942:IV-48:II. It finds that the pricelevel was reduced by at least 30.4 percent and that this suppression of inflation reduced employment by at least 11.7 percent and output by at least 7.1 percent. It also finds that monetary policy could have been equally successful in combating inflation but would not have had the side effect of reducing employment and output.