Fair Behavior and Inflation Persistence
In their seminal paper Fuhrer and Moore (1995) provide an explanation for the existence of inflation inertia. Driscoll and Holden (2003) argue that under more plausible assumptions the model of Fuhrer and Moore (1995) will coincide with the model of Taylor (1979) which can only explain sticky prices but not sticky inflation. Following the suggestions by Driscoll and Holden (2003) we extend their setting allowing for other-regarding preferences. It turns out that this new extended model is consistent with the one by Fuhrer and Moore (1995). This means that, even under the strong assumption of rational expectations, inflation is not only governed by its future expected but also by its past values. This is in line with empirical findings.
|Date of creation:||22 Feb 2005|
|Date of revision:|
|Note:||I would like to thank Björn Frank and Oliver Kirchkamp for helpful comments. Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.|
|Contact details of provider:|| Postal: D-68131 Mannheim|
Phone: (49) (0) 621-292-2547
Fax: (49) (0) 621-292-5594
Web page: http://www.sfb504.uni-mannheim.de/
More information through EDIRC
Web page: http://www.sfb504.uni-mannheim.de
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Falk, Armin & Fischbacher, Urs, 2006.
"A theory of reciprocity,"
Games and Economic Behavior,
Elsevier, vol. 54(2), pages 293-315, February.
- Falk, Armin & Fischbacher, Urs, 2001. "A Theory of Reciprocity," CEPR Discussion Papers 3014, C.E.P.R. Discussion Papers.
- Armin Falk & Urs Fischbacher, . "A Theory of Reciprocity," IEW - Working Papers 006, Institute for Empirical Research in Economics - University of Zurich.
- Armin Falk & Urs Fischbacher, 2001. "A Theory of Reciprocity," CESifo Working Paper Series 457, CESifo Group Munich.
- Holden, Steinar & Driscoll, John C., 2003.
"Coordination, Fair Treatment and Inflation Persistence,"
25/2002, Oslo University, Department of Economics.
- John C. Driscoll & Steinar Holden, 2003. "Coordination, fair treatment and inflation persistence," Finance and Economics Discussion Series 2003-34, Board of Governors of the Federal Reserve System (U.S.).
- John C. Driscoll & Steinar Holden, 2002. "Coordination, Fair Treatment and Inflation Persistence," NBER Working Papers 9174, National Bureau of Economic Research, Inc.
- Amato, Jeffery D. & Laubach, Thomas, 2003.
"Rule-of-thumb behaviour and monetary policy,"
European Economic Review,
Elsevier, vol. 47(5), pages 791-831, October.
- Flint Brayton & Peter A. Tinsley, 1996. "A guide to FRB/US: a macroeconomic model of the United States," Finance and Economics Discussion Series 96-42, Board of Governors of the Federal Reserve System (U.S.).
- Brayton, Flint & Levin, Andrew & Lyon, Ralph & Williams, John C., 1997. "The evolution of macro models at the Federal Reserve Board," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 47(1), pages 43-81, December.
- Steinar Holden & John C. Driscoll, 2003.
"Inflation Persistence and Relative Contracting,"
American Economic Review,
American Economic Association, vol. 93(4), pages 1369-1372, September.
- John M. Roberts, 1994. "Is inflation sticky?," Working Paper Series / Economic Activity Section 152, Board of Governors of the Federal Reserve System (U.S.).
- John M. Roberts, 1998. "Inflation expectations and the transmission of monetary policy," Finance and Economics Discussion Series 1998-43, Board of Governors of the Federal Reserve System (U.S.).
When requesting a correction, please mention this item's handle: RePEc:xrs:sfbmaa:05-09. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Carsten Schmidt)The email address of this maintainer does not seem to be valid anymore. Please ask Carsten Schmidt to update the entry or send us the correct email address
If references are entirely missing, you can add them using this form.