Inflation, expectations and growth in real money in the United States
Yin, Ya; Thomas, David
Citation: Yin , Y & Thomas , D 2011 ' Inflation, expectations and growth in real money in the United States ' Business School Working Papers , University of Hertfordshire .
This paper aims to explain the change in the rate of inflation within the United States economy by following a new Classical–Keynesian synthesis view and by incorporating private inflation expectations directly into the inflation determination process. A parsimonious unrestricted VAR approach is adopted to expose the long-run solution that is subsequently included in an error-correction model with the short-run dynamics. The empirical results reveal the full efficiency in private inflation expectations formation and support for the Classical Quantity Theory mechanism of inflation determination in the long run.