The Great Inflation and the Greenbook |
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Authors: | Giacomo Carboni Martin Ellison |
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Institution: | aEuropean Central Bank, Directorate General Statistics, Kaiserstrasse 29, 60311 Frankfurt, Germany;bDepartment of Economics, University of Oxford, Manor Road Building, Oxford OX1 2UQ, UK |
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Abstract: | Can the story of evolving Federal Reserve beliefs in The Conquest of American Inflation simultaneously explain the Great Inflation and the forecasts published in the Greenbook during that time? If Sargent is correct then evolving beliefs should be reflected not only in policy outcomes but also in Greenbook forecasts. In this paper they are. By conditioning on the Greenbook, it is show that both inflation outcomes and Greenbook forecasts can be rationalised by evolving beliefs. The results improve on recent empirical evidence that has been criticised for relying on unrealistic beliefs that produce forecasts inconsistent with the Greenbook. |
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Keywords: | Great Inflation Greenbook Learning Monetary policy |
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