Evolving Post-World War II U.S. Inflation Dynamics

Timothy Cogley, Thomas Sargent

    Research output: Contribution to journalArticle

    Abstract

    For postwar U.S. data, this paper uses Bayesian methods to account for the four sources of uncertainty in a random coefficients vector autoregression for inflation, unemployment, and an interest rate. We use the model to assemble evidence about the evolution of measures of the persistence of inflation, prospective long-horizon forecasts (means) of inflation and unemployment, statistics for testing an approximation to the natural-unemployment-rate hypothesis, and a version of the Taylor rule. We relate these measures to stories that interpret the conquest of U.S. inflation under Volcker and Greenspan as reflecting how the monetary policy authority came to learn an approximate version of the natural-unemployment-rate hypothesis. We study Taylor's warning that defects in that approximation may cause the monetary authority to forget the natural-rate hypothesis as the persistence of inflation attenuates.

    Original languageEnglish (US)
    Pages (from-to)313-373
    Number of pages61
    JournalNBER Macroeconomics Annual
    Volume16
    Issue number1
    StatePublished - 2001

    Fingerprint

    Second World War
    Inflation dynamics
    Inflation
    Approximation
    Authority
    Unemployment
    Persistence
    Unemployment rate
    Bayesian methods
    Statistics
    Vector autoregression
    Defects
    Natural rate hypothesis
    Uncertainty
    Taylor rule
    Interest rates
    Random coefficients
    Monetary policy
    Testing
    Warning

    ASJC Scopus subject areas

    • Economics and Econometrics

    Cite this

    Cogley, T., & Sargent, T. (2001). Evolving Post-World War II U.S. Inflation Dynamics. NBER Macroeconomics Annual, 16(1), 313-373.

    Evolving Post-World War II U.S. Inflation Dynamics. / Cogley, Timothy; Sargent, Thomas.

    In: NBER Macroeconomics Annual, Vol. 16, No. 1, 2001, p. 313-373.

    Research output: Contribution to journalArticle

    Cogley, T & Sargent, T 2001, 'Evolving Post-World War II U.S. Inflation Dynamics', NBER Macroeconomics Annual, vol. 16, no. 1, pp. 313-373.
    Cogley, Timothy ; Sargent, Thomas. / Evolving Post-World War II U.S. Inflation Dynamics. In: NBER Macroeconomics Annual. 2001 ; Vol. 16, No. 1. pp. 313-373.
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