Indeterminacy and learning: An analysis of monetary policy in the Great Inflation

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dc.contributor.authorLubik, T.A.
dc.contributor.authorMatthes, C.
dc.date.issued2016
dc.descriptionISSN: 2475-5648 ; 2475-563X
dc.description.abstractThe Great Inflation of the 1970s can be understood as the result of equilibrium indeterminacy in which loose monetary policy engendered excess volatility in macroeconomic aggregates and prices. The Federal Reserve inadvertently pursued policies that were not anti-inflationary enough because it did not fully understand the economic environment it was operating in. Specifically, it had imperfect knowledge about the structure of the economy and was subject to data misperceptions. The combination of learning about the economy and the use of mis-measured data resulted in policies, which the Federal Reserve believed to be optimal, but when implemented led to equilibrium indeterminacy.
dc.description.statementofresponsibilityThomas A. Lubik, Christian Matthes
dc.identifier.citation2016; 82(C):85-106
dc.identifier.urihttp://hdl.handle.net/2440/104656
dc.language.isoen
dc.publisherFederal Reserve Bank of Richmond
dc.relation.ispartofseriesWorking papers series /Federal Reserve Bank of Richmond ; 14-02
dc.rights© 2014 Federal Reserve Bank of Richmond
dc.source.urihttps://www.richmondfed.org/publications/research/working_papers/2014/wp_14-02
dc.subjectFederal reserve; great moderation; Bayesian estimation; least squares learning
dc.titleIndeterminacy and learning: An analysis of monetary policy in the Great Inflation
dc.typeJournal article
pubs.publication-statusPublished

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