Was the Disinflation of the Early 1980s Anticipated?
19 Pages Posted: 15 Nov 2012
Date Written: 1995
The disinflationary episode of the early 1980s was dramatic in the magnitude of the decline in inflation as well as the significant loss of output. Also, the disinflationary policy was announced and carried out over a three-year period. Thus, this episode has the potential to test competing theories of the linkage between economic activity and nominal disturbances. Discriminating among theories depends crucially on whether disinflation was anticipated and whether the change in Federal Reserve policy was expected.
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