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The Changing Dynamics of Inflation

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  • Randall S Kroszner

Abstract

Inflation in the United States and elsewhere has become lower and more stable over the past two decades. It is likely that monetary policy has played an important role in this change in inflation dynamics by creating expectations of stability. This paper traces the evolution of the role of expectations in thinking about inflation, the supporting evidence over the past two decades, and role of central banks in influencing expectations. Increased global integration has magnified these effects. However, the importance of factors other than monetary policy implies that policymakers must consider a wide range of information before acting. Moreover, expectations of inflation stability cannot be taken for granted; and policymakers must be vigilant against complacency.Business Economics (2007) 42, 7–13; doi:10.2145/20070301

Suggested Citation

  • Randall S Kroszner, 2007. "The Changing Dynamics of Inflation," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 42(3), pages 7-13, July.
  • Handle: RePEc:pal:buseco:v:42:y:2007:i:3:p:7-13
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    Cited by:

    1. Jane E. Ihrig & Steven B. Kamin & Deborah J. Lindner & Jaime R. Marquez, 2007. "Some simple tests of the globalization and inflation hypothesis," International Finance Discussion Papers 891, Board of Governors of the Federal Reserve System (U.S.).
    2. Todd E. Clark & Taisuke Nakata, 2008. "Has the behavior of inflation and long-term inflation expectations changed?," Economic Review, Federal Reserve Bank of Kansas City, issue Q I, pages 17-50.

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