The Expectations Trap Hypothesis / Lawrence J. Christiano, Christopher J. Gust.

Format:

Book

Author/Creator:

Christiano, Lawrence J.

Contributor:

National Bureau of Economic Research.

Gust, Christopher J.

Series:

Working Paper Series (National Bureau of Economic Research) no. w7809.

NBER working paper series no. w7809

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2000.

Summary:

We explore a hypothesis about the take-off in inflation that occurred in the early 1970s. According to the expectations trap hypothesis, the Fed was pushed into producing the high inflation out of a fear of violating the public's inflation expectations. We compare this hypothesis with the Phillips curve hypothesis, according to which the Fed produced the high inflation as an unfortunate by-product of a conscious decision to jump-start a weak economy. Which hypothesis is more plausible has important implications for what needs to be done to prevent other inflation flare-ups.

Notes:

Print version record

July 2000.