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Self-fulfilling expectations and the inflation of the 1970s: Evidence from the Livingston Survey

  • Leduc, Sylvain
  • Sill, Keith
  • Stark, Tom

Using survey data on expectations, the authors examine whether the post-war data are consistent with theories of a self-fulfilling inflation episode during the 1970s. Among commonly cited factors, oil and fiscal shocks do not appear to have triggered an increase in expected inflation that was subsequently validated by monetary policy. However, the evidence suggests that, prior to 1979, the Fed accommodated temporary shocks to expected inflation, which then led to permanent increases in actual inflation. The authors do not find this behavior in the post-1979 data.

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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 54 (2007)
Issue (Month): 2 (March)
Pages: 433-459

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Handle: RePEc:eee:moneco:v:54:y:2007:i:2:p:433-459
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