Inflation Expectations and the Stabilization of Inflation: Alternative Hypotheses

Jeremy J. Nalewaik

No 2016-035, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper examines two candidate hypotheses explaining the stabilization of U.S. inflation since the 1970s and 1980s. The first explanation credits the stabilization of inflation expectations, and assumes those expectations have a strong positive causal effect on actual subsequent inflation, while the second explanation credits the disappearance of such a strong positive causal effect. The paper reports statistical tests favorable to both a stabilization of inflation expectations and a marked decline in the effect of the general public?s inflation expectations on subsequent inflation.

Keywords: Inflation; Phillips Curve (search for similar items in EconPapers)
JEL-codes: E31 E52 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2016-04-21
New Economics Papers: this item is included in nep-cba, nep-his, nep-pr~, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2016-35

DOI: 10.17016/FEDS.2016.035

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