TY  - JOUR
AU  - Christiano,Lawrence J.
AU  - Gust,Christopher J.
TI  - The Expectations Trap Hypothesis
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7809
PY  - 2000
Y2  - July 2000
UR  - http://www.nber.org/papers/w7809
L1  - http://www.nber.org/papers/w7809.pdf
N1  - Author contact info:
Lawrence Christiano
Department of Economics
Northwestern University
2001 Sheridan Road
Evanston, IL 60208
Tel: 847/491-8231
Fax: 847/491-7001
E-Mail: l-christiano@northwestern.edu
AB  - We explore a hypothesis about the take-off in inflation that occurred in the early 1970s. According to the expectations trap hypothesis, the Fed was pushed into producing the high inflation out of a fear of violating the public's inflation expectations. We compare this hypothesis with the Phillips curve hypothesis, according to which the Fed produced the high inflation as an unfortunate by-product of a conscious decision to jump-start a weak economy. Which hypothesis is more plausible has important implications for what needs to be done to prevent other inflation flare-ups.
ER  -