Modeling Inflation Dynamics: A Critical Review of Recent Research

Jeremy Rudd and Karl T. Whelan ()

Journal of Money, Credit and Banking, 2007, vol. 39, issue s1, pages 155-170

Abstract: In recent years, a broad academic consensus has arisen that favors using rational expectations sticky-price models to capture inflation dynamics. We review the principal conclusions of this literature concerning: (1) the ability of these models to fit the data; (2) the importance of rational forward-looking expectations in price setting; and (3) the appropriate measure of inflationary pressures. We argue that existing models fail to provide a useful empirical description of the inflation process. Copyright 2007 The Ohio State University.

Date: 2007
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Working Paper: Modelling inflation dynamics: a critical review of recent research (2005)
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