IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/30763.html
   My bibliography  Save this paper

Evolving Reputation for Commitment: The Rise, Fall and Stabilization of US Inflation

Author

Listed:
  • Robert G. King
  • Yang K. Lu

Abstract

A parsimonious model of shifting policy regimes can simultaneously capture expected and actual US inflation during 1969-2005. Our model features a forward-looking New Keynesian Phillips curve and purposeful policymakers that can or cannot commit. Private sector learning about policymaker type leads to a reputation state variable. We use model inflation forecasting rules to extract state variables from SPF inflation forecasts. US inflation is tracked by optimal policy without commitment before 1981 and by optimal policy with commitment afterward. In theory and quantification, the interaction of private sector learning and optimal policy within regimes is central to expected and actual inflation.

Suggested Citation

  • Robert G. King & Yang K. Lu, 2022. "Evolving Reputation for Commitment: The Rise, Fall and Stabilization of US Inflation," NBER Working Papers 30763, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:30763
    Note: EFG ME
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w30763.pdf
    Download Restriction: no
    ---><---

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:30763. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.