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

  • Sylvain Leduc
  • Keith Sill
  • Tom Stark

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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Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 02-13.

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Date of creation: 2002
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Handle: RePEc:fip:fedpwp:02-13
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  19. Lubik, Thomas A. & Schorfheide, Frank, 2003. "Computing sunspot equilibria in linear rational expectations models," Journal of Economic Dynamics and Control, Elsevier, vol. 28(2), pages 273-285, November.
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  29. Eichenbaum, Martin, 1998. "Costly capital reallocation and the effects of government spending : A comment," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 48(1), pages 195-209, June.
  30. Dean Croushore, 1997. "The Livingston Survey: still useful after all these years," Business Review, Federal Reserve Bank of Philadelphia, issue Mar, pages 15-27.
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