Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/72023
Authors: 
Sommer, Martin
Year of Publication: 
2002
Series/Report no.: 
Working Papers, The Johns Hopkins University, Department of Economics 485
Abstract: 
This paper examines the long-run effects of supply shocks (such as oil shocks) on inflation in the United States. The persistence of supply shocks in U.S. inflation fell considerably during the period of Volcker's disinflation (1979-1982). My empirical results suggest that the difference between the pre-Volcker and post-Volcker periods is attributable to the change in the behavior of inflation expectations-agents expected shocks to persist in the pre-Volcker period, but not in the post-Volcker period. I construct a simple model of how different monetary policies lead to different persistence equilibria.
Subjects: 
inflation
supply shocks
inflation expectations
persistence
Great Inflation
JEL: 
E31
E52
E58
E65
Document Type: 
Working Paper

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