An Inflation Forecasting Model for the 1980s
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The 1970s and early 1980s were characterized by accelerating inflation associated with increasing levels of unemployment. The traditional demandpull and cost-push theories of inflation failed to satisfactorily explain the prevailing situation. Instead, a plausible explanation for this unusual economic occurrence was offered by the rational expectations theory. It could conceivably be argued that under the conditions of increasing uncertainty about future price movements, the economic participants may adopt rational type in favor of the traditional adaptive approach.
This paper has been withdrawn.