Can rational expectations sticky-price models explain inflation dynamics?
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|Title:||Can rational expectations sticky-price models explain inflation dynamics?||Authors:||Whelan, Karl
|Permanent link:||http://hdl.handle.net/10197/199||Date:||Mar-2006||Online since:||2008-06-05T14:08:34Z||Abstract:||The canonical inflation specification in sticky-price rational expectations models (the new-Keynesian Phillips curve) is often criticized for failing to account for the dependence of inflation on its own lags. In response, many studies employ a “hybrid” specification in which inflation depends on its lagged and expected future values, together with a driving variable such as the output gap. We consider some simple tests of the hybrid model that are derived from its closed form. We find that the hybrid model describes inflation dynamics poorly, and find little empirical evidence for the type of rational, forward-looking behavior that the model implies.||Type of material:||Journal Article||Publisher:||American Economic Association||Journal:||American Economic Review||Volume:||96||Issue:||1||Start page:||303||End page:||320||Copyright (published version):||Copyright of the American Economic Review is the Property of the American Economic Association 2006||Keywords:||Inflation (Finance); Rational expectations (Economic theory); Economic policy; Pricing||Subject LCSH:||Inflation (Finance)--Mathematical models
Rational expectations (Economic theory)--United States
|Language:||en||Status of Item:||Peer reviewed|
|Appears in Collections:||Economics Research Collection|
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