We develop a simple, quantitative model of the U.S. economy to demonstrate how an "inflation scare " may occur when the Federal Reserve lacks full credibility. In particular, we show that the long-term nominal interest rate may undergo a sudden increase if an adverse movement in the inflation...

We use a version of the Fuhrer-Moore model to study the effects of expectations and central bank credibility on the economy's dynamic transition path during a disinflation. Simulations are compared under four different specifications of the model that vary according to the way that expectations...

We use a version of the Fuhrer-Moore model to study the effects of expectations and central bank credibility on the economy's dynamic transition path during a disinflation. Simulations are compared under four different specifications of the model that vary according to the way that expectations...

A study of the effects of expectations and central bank credibility on the economy's dynamic transition path during a disinflation. Using a version of the Fuhrer-Moore model, it compares simulations under different specifications that vary according to the way expectations are formed and the...