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| Tekijä: | Fuhrer, J. C. |
| Otsikko: | The (Un)Importance of Foward-Looking Behavior in Price Specifications |
| Lehti: | Journal of Money, Credit and Banking
1997 : AUG, Vol. 29:3, p. 338-350 |
| Asiasana: | PRICE LEVEL FUTURE INFLATION |
| Kieli: | eng |
| Tiivistelmä: | The seminal work of Phelps, Taylor and Calvo developed forward-looking models of price determination that imparted inertia to the price level. These models incorporate expectations of future prices and excess demand by imposing constraints (typically lag-lead symmetry constraints) that force future variables to enter the specification. In this paper, I test the empirical significance of future prices in specifications like those of Taylor. i find that expectations of future prices are empirically unimportant in explaining price and inflation behavior. However, the dynamics of a model that includes a purely backward-looking inflation specification differ substantially - and not altogether pleasingly - from those with a forward looking specification. |
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