If we consider U.S. IOCS performance in the last 40-plus years and classify this period according to inflation-stabilizing policy stances, a few facts emerge. Between 1960 and 2000, policy practices that emphasize and deemphasize inflation stability coincide with distinct IOCS and non-IOCS behavior. Among the more dramatic business cycle episodes was the stagflation of the 1970s, the sharp disinflation of the early 1980s, and the expansions of the 1980s and 1990s.

To gain a deeper understanding of the relation between policy and IOCS, we discuss these patterns in the context of various historical events (see, for example, Mayer 1999; Taylor 1999a; Orphanides 2003). These events precipitated various policy reactions, which in turn had important economic outcomes. These economic outcomes are associated with the emphasis and deemphasis placed on inflation-stabilizing policy actions (Clarida et al. 2000).

In this chapter we also demonstrate that the variability in policy (and IOCS) was not haphazard, but stemmed from changes in scientific research concerning the Phillips curve. Recall that our view is that academic ideas and policy implementation should be blurred. Indeed, both academic and policymaker attitudes toward the Phillips curve best illustrate whether policymakers are going to act in ways that facilitate information coordination.

Indeed, we do find that policy implementation deemphasized and then reemphasized inflation stability as academic views on the Phillps curve evolved.