Indeed, the first wave of controls were successful at curbing inflation temporarily while the administration used expansionary fiscal and monetary policies.
It could force countries to pursue deflationary policies at exactly the time when expansionary measures were called for to address rising unemployment.
Expansionary monetary policy to stimulate the economy typically involves the central bank buying short-term government bonds in order to lower short-term market interest rates.
Central banks manage systemic risks by maintaining a balance between expansionary economic activity through bank lending and control of inflation through reserve requirements.
This stagflation meant that both expansionary (anti-recession) and contractionary (anti-inflation) policies had to be applied simultaneously, a clear impossibility.
If they behave as strategic complements, then an expansionary (contractionary) policy of one authority is met by expansionary (contractionary) policies of other.
