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dc.contributor.authorOrphanides, Athanasiosen_US
dc.contributor.authorWilliams, John C.en_US
dc.date.accessioned2006-08-01en_US
dc.date.accessioned2009-07-24T13:47:30Z-
dc.date.available2009-07-24T13:47:30Z-
dc.date.issued2004en_US
dc.identifier.piurn:nbn:de:hebis:30-10758-
dc.identifier.urihttp://hdl.handle.net/10419/25445-
dc.description.abstractWe develop an estimated model of the U.S. economy in which agents form expectations by continually updating their beliefs regarding the behavior of the economy and monetary policy. We explore the effects of policymakers' misperceptions of the natural rate of unemployment during the late 1960s and 1970s on the formation of expectations and macroeconomic outcomes. We find that the combination of monetary policy directed at tight stabilization of unemployment near its perceived natural rate and large real-time errors in estimates of the natural rate uprooted heretofore quiescent in inflation expectations and destabilized the economy. Had monetary policy reacted less aggressively to perceived unemployment gaps, in inflation expectations would have remained anchored and the stag inflation of the 1970s would have been avoided. Indeed, we find that less activist policies would have been more effective at stabilizing both in inflation and unemployment. We argue that policymakers, learning from the experience of the 1970s, eschewed activist policies in favor of policies that concentrated on the achievement of price stability, contributing to the subsequent improvements in macroeconomic performance of the U.S. economy.en_US
dc.language.isoengen_US
dc.publisherCenter for Financial Studies Frankfurt, Mainen_US
dc.relation.ispartofseriesCFS Working Paper 2004/24en_US
dc.subject.jelE52en_US
dc.subject.ddc330en_US
dc.subject.keywordMonetary Policyen_US
dc.subject.keywordStagnationen_US
dc.subject.keywordRational Expectationsen_US
dc.subject.keywordLearningen_US
dc.subject.stwGeldpolitiken_US
dc.subject.stwStagflationen_US
dc.subject.stwRationale Erwartungen_US
dc.subject.stwNatürliche Arbeitslosigkeiten_US
dc.subject.stwLernprozessen_US
dc.subject.stwUSAen_US
dc.titleThe decline of activist stabilization policy: Natural rate misperceptions, learning, and expectationsen_US
dc.typeWorking Paperen_US
dc.identifier.ppn515164909en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-
dc.identifier.repecRePEc:zbw:cfswop:200424-
Appears in Collections:CFS Working Paper Series, Universität Frankfurt a. M.

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