University of Hertfordshire

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  • S125

    Final published version, 365 KB, PDF document

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Original languageEnglish
PublisherUniversity of Hertfordshire
Publication statusPublished - 2011

Publication series

NameBusiness School Working Papers
PublisherUniversity of Hertfordshire

Abstract

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.

ID: 318170