Expectation Traps and Monetary Policy

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  • 1 January 2002
    • preprint
      • Published in RePEc
Abstract
We describe a class of monetary economies that generate persistent episodes of high and low inflation. In this class of economies, variations in expectations can lead private agents to take actions which then make it optimal for the monetary authority to validate those expectations. We think these models deserve attention because they display several good empirical properties.
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