"During the economic expansion of the 1990s, the United States enjoyed both low inflation rates and low levels of … unemployment. Juhn, Murphy, and Topel (2002) point out that the low unemployment rates for men in the 1990s were accompanied by … historically high rates of non-employment suggesting that the 1990s economy was not as strong as the unemployment rate might …

"Why is inflation persistently high in some periods and low in others? The reason may be absence of commitment in … trigger strategies. In these traps, expectations of high or low inflation lead the public to take defensive actions, which … inflation rate is low on average. This analysis suggests that institutions which promote commitment can prevent high inflation …

, since they move real rates and expected inflation in opposite directions. Monetary policy shocks are the only macroeconomic …