Sargent, Thomas
[VerfasserIn]
;
Williams, Noah
[Sonstige Person, Familie und Körperschaft];
Zha, Tao
[Sonstige Person, Familie und Körperschaft]National Bureau of Economic Research
Shocks and Government Beliefs
: The Rise and Fall of American Inflation
Erschienen:
Cambridge, Mass: National Bureau of Economic Research, September 2004
Erschienen in:NBER working paper series ; no. w10764
Umfang:
1 Online-Ressource
Sprache:
Englisch
DOI:
10.3386/w10764
Identifikator:
Reproduktionsnotiz:
Hardcopy version available to institutional subscribers
Entstehung:
Anmerkungen:
Mode of access: World Wide Web
System requirements: Adobe [Acrobat] Reader required for PDF files
Beschreibung:
We use a Bayesian Markov Chain Monte Carlo algorithm to estimate a model that allows temporary gaps between a true expectational Phillips curve and the monetary authority's approximating non-expectational Phillips curve. A dynamic programming problem implies that the monetary authority's inflation target evolves as its estimated Phillips curve moves. Our estimates attribute the rise and fall of post WWII inflation in the US to an intricate interaction between the monetary authority's beliefs and economic shocks. Shocks in the 1970s altered the monetary authority's estimates and made it misperceive the tradeoff between inflation and unemployment. That caused a sharp rise in inflation in the 1970s. Our estimates say that policymakers updated their beliefs continuously. By the 1980s, their beliefs about the Phillips curve had changed enough to account for Volcker's conquest of US inflation in the early 1980s