The rise and fall of American inflation

In this Atlanta Fed Working Paper the authors estimate a model that allows temporary gaps between a true expectational Phillips curve and the monetary authority's approximating nonexpectational Phillips curve. Their estimates indicate that policy makers updated their beliefs continuously. By the 1980s, policy makers' beliefs about the Phillips curve had changed enough to account for Fed chairman Paul Volcker's conquest of U.S. inflation in the early 1980s.

Click here to read the Working Paper

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