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Inflation regimes and inflation expectations

Joseph Gagnon

No 581, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: There has been much talk in the popular press about the difficulty of attaining credibility in the bond markets for the low-inflation policies that have been adopted by a number of central banks in recent years. This credibility problem is particularly severe for those countries that have a history of high inflation. Gaining credibilty is often viewed in the context of learning by the public about the central bank's true intentions. However, this paper argues that a more important aspect of credibility--at lease for long-term inflation expectations--may be public views about how future changes in personnel, electoral results, or economic shocks may affect central bank behavior. In other words, there is always a positive probability that the current regime will end. Views about the nature of possible future regimes are likely to be influenced by observed past regimes.

Keywords: Inflation; (Finance) (search for similar items in EconPapers)
Date: 1997
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Related works:
Journal Article: Inflation regimes and inflation expectations (2008) Downloads
Working Paper: Inflation Regimes and Inflation Expectations (1997) Downloads
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