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Expectation Traps and Monetary Policy

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  • Stefania Albanesi

    (Bocconi University and IGIER)

  • V. V. Chari

    (University of Minnesota and Federal Reserve Bank of Minneapolis)

  • Lawrence J. Christiano

    (Northwestern University and Federal Reserve Bank of Chicago)

Abstract

We describe a class of monetary economies that generate persistent episodes of high and low inflation. In this class of economies, variations in expectations can lead private agents to take actions which then make it optimal for the monetary authority to validate those expectations. We think these models deserve attention because they display several good empirical properties.

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File URL: http://128.118.178.162/eps/mac/papers/0201/0201004.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 0201004.

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Length: 42 pages
Date of creation: 10 Jan 2002
Date of revision:
Handle: RePEc:wpa:wuwpma:0201004

Note: Type of Document - Acrobat PDF; prepared on IBM PC ; to print on HP; pages: 42 ; figures: included. 42 pages PDF format
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Web page: http://128.118.178.162

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Keywords: Inflation Time-Consistency;

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