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Expectation Traps and Monetary Policy

  • 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)

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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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
Contact details of provider: Web page: http://econwpa.repec.org

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  14. John H. Cochrane, 1998. "A Frictionless View of U.S. Inflation," CRSP working papers 479, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
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  19. Neiss, Katharine S, 1999. "Discretionary Inflation in a General Equilibrium Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(3), pages 357-74, August.
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  29. Julio J. Rotemberg & Michael Woodford, 1999. "Interest Rate Rules in an Estimated Sticky Price Model," NBER Chapters, in: Monetary Policy Rules, pages 57-126 National Bureau of Economic Research, Inc.
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