Inflation Expectations, Uncertainty, The Phillips Curve, And Monetary Policy
Inflation expectations play a central role in models of the Phillips curve. At long time horizons inflation expectations may reflect the credibility of a monetary authority's commitment to price stability. These observations highlight the importance of inflation expectations for monetary policy. These comments touch on three issues regarding inflation expectations: The evolving treatment of inflation expectations in empirical Phillips curve models; three recent models of information imperfections and inflation expectations; and potential policy implications of different models.