Expectation Traps and Monetary Policy

Abstract:We describe a class of monetary economies that generate persistent episodes of high and low in?ation. In these 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 model economies deserve attention because they display several good empirical implications.

Authors: Stefania Albanesi, V.V. Chari, Lawrence J. Christiano

1 Albanesi, Chari & Christiano 2001.pdf