Re-establishing Credibility: The Behavior of Inflation Expectations in the Post-Volcker United States*
| Title: | Re-establishing Credibility: The Behavior of Inflation Expectations in the Post-Volcker United States* |
|---|---|
| Authors: | J. Scott Davis; Jel Codes D |
| Contributors: | The Pennsylvania State University CiteSeerX Archives |
| Source: | http://www.dallasfed.org/assets/documents/institute/wpapers/2012/0117.pdf. |
| Publication Year: | 2012 |
| Collection: | CiteSeerX |
| Description: | Long-term inflation expectations remained remarkably volatile in the United States for years after the well-documented switch to a more stable monetary regime in the early 1980s. This volatility cannot be explained by the standard New Keynesian model. This paper introduces a model where agents are unsure about the central bank’s commitment to their inflation target. They assume that the central bank will partially accommodate any unexpected inflation. Thus a series of high inflation observations can lead them to believe (incorrectly) that the central bank has adopted a high target. The model can match the observed volatility of long-term inflation expectations. |
| Document Type: | text |
| File Description: | application/pdf |
| Language: | English |
| Relation: | http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.636.6282; http://www.dallasfed.org/assets/documents/institute/wpapers/2012/0117.pdf |
| Availability: | http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.636.6282; http://www.dallasfed.org/assets/documents/institute/wpapers/2012/0117.pdf |
| Rights: | Metadata may be used without restrictions as long as the oai identifier remains attached to it. |
| Accession Number: | edsbas.8EA27877 |
| Database: | BASE |