Analyzing 50 years of inflation expectations data from several sources, we document substantial disagreement among both consumers and professional economists about expected future inflation. Moreover, this disagreement shows substantial variation through time, moving with inflation, the absolute value of the change in inflation, and relative price variability. We argue that a satisfactory model of economic dynamics must speak to these important business cycle moments. Noting that most macroeconomic models do not endogenously generate disagreement, we show that a simple sticky-information' model broadly matches many of these facts. Moreover, the sticky-information model is consistent with other observed departures of inflation expectations from full rationality, including autocorrelated forecast errors and insufficient sensitivity to recent macroeconomic news
Abstract: Analyzing 50 years of inflation expectations data from several sources, we document substantial disagreement among both consumers and professional economists about expected future inflation.
This paper discusses the NAIRU -- the non-accelerating inflation rate of unemployment. It first considers the role of the NAIRU concept in business cycle theory, arguing that this concept is implicit in any model in which monetary policy influences both inflation and unemployment. The exact value of the NAIRU is hard to measure, however, in part because it changes over time. The paper then discusses why the NAIRU changes and, in particular, why it fell in the United States during the 1990s. The most promising hypothesis is that the decline in the NAIRU is attributable to the acceleration in productivity growth
David R. Hakes (University of Northern Iowa) has prepared a study guide that will enhance student success. Each chapter of the study guide includes learning objectives, a description of the chapter's context and purpose, a chapter review, key terms and definitions, advanced critical thinking questions, and helpful hints for understanding difficult concepts. Students can develop their understanding by doing the practice problems and short answer question, then assess their mastery of the key concepts with the self-test, which includes true/false and multiple choice questions.
Each chapter of the study guide includes learning objectives, a description of the chapter's context and purpose, a chapter review, key terms and definitions, advanced critical thinking questions, and helpful hints for understanding ...
Balancing classical and Keynesian economics, this work uses the modern approach of presenting long-run analysis before short-run fluctuations, and covers the large open economy in depth. This edition includes a revised section that reflects the evolving nature of courses.
Balancing classical and Keynesian economics, this work uses the modern approach of presenting long-run analysis before short-run fluctuations, and covers the large open economy in depth.
