The expectations trap hypothesis

Lawrence Christiano () and Christopher Gust

No 676, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We explore a hypothesis about the take-off in inflation that occurred in the early 1970s. According to the expectations trap hypothesis, the Fed was pushed into producing the high inflation out of a fear of violating the public's inflation expectations. We compare this hypothesis with the Phillips curve hypothesis, according to which the Fed produced the high inflation as an unfortunate by-product of a conscious decision to jump-start a weak economy.

Keywords: Inflation (Finance); Phillips curve; Monetary policy - United States (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-his and nep-mon
Date: 2000
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Related works:
Working Paper: The Expectations Trap Hypothesis (2000)
Working Paper: The expectations trap hypothesis (2000)
Journal Article: The expectations trap hypothesis (2000)
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