Cohen-Setton, Jeremie, (2015), “The triumph of backward-looking economics”, Bruegel publications, 7 September
What’s at stake: At a time when monetary policy makers have a hard time generating inflation despite credible monetary regime changes (e.g. Japan), it is tempting to argue that there is simply substantial inertia in inflation. In this modern version of the old debate about the relative merit between rational and adaptive expectations, the reinterpretation of Reagan-Volker era disinflation episode has taken center stage, with a few authors arguing that rather than being at odds with backward looking models, this episode lends credence to the idea of inflation inertia.
Relevant Posts
- Roubini, Nouriel, (2015), “A Financial Early-Warning System”, Project Syndicate, 27 August
- Weeks, John, (2015), “Economic Recovery? Why Eurozone Under-performance Continues”, Social Europe Journal, 25 August