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How inflation hawks escape expectations traps

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  • Sylvain Leduc

Abstract

Why did inflation increase so dramatically from the 1960s to the 1970s? One possible theory is that once people started believing inflation would rise, the Fed was forced to validate those expectations by increasing the money supply. In \\"How Inflation Hawks Escape Expectations Traps,\\" Sylvain Leduc discusses this \\"expectations trap\\" hypothesis and uses a direct measure of expectations to see if the theory is consistent with the data.

Suggested Citation

  • Sylvain Leduc, 2003. "How inflation hawks escape expectations traps," Business Review, Federal Reserve Bank of Philadelphia, issue Q1, pages 13-20.
    • Handle: RePEc:fip:fedpbr:y:2003:i:q1:p:13-20
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    References listed on IDEAS

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    1. Satyajit Chatterjee, 2002. "The Taylor curve and the unemployment-inflation tradeoff," Business Review, Federal Reserve Bank of Philadelphia, issue Q3, pages 26-33.
    2. Chari, V. V. & Christiano, Lawrence J. & Eichenbaum, Martin, 1998. "Expectation Traps and Discretion," Journal of Economic Theory, Elsevier, vol. 81(2), pages 462-492, August.
    3. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
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