Is the New Keynesian Explanation of the Great Dis-Inflation Consistent with the Cross Country Data?

Matthew Doyle and Jean-Paul Lam

No 1010, Working Papers from University of Waterloo, Department of Economics

Abstract: A leading explanation of long run U.S. inflation trends attributes both the fall of inflation in the 1980s and the subsequent years of low and stable inflation to well run monetary policy pinning down inflationary expectations. Most other OECD economies experienced a similar rise and fall of inflation, as well as subsequent low and stable inflation over the same period. This observation has been under-explored in the literature. In this paper we exploit the international dimension of the fall of inflation to investigate the hypothesis that good monetary policy is responsible for recent inflation outcomes. Our results suggest that this theory is not compatible with the cross country data.

JEL-codes: E42 E50 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2010-10, Revised 2010-10
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:wat:wpaper:1010

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