655 - The conquest of American Inflation' by Thomas J. Sargent: a review

Wetenschappelijke publicatie
Date 1 July 2001

This report reviews Thomas J. Sargents essay 'The Conquest of American Inflation' (1999). Sargent searches for a model which can explain postwar US inflation and which may shed light on the dynamic forces which drive this pattern. Following Sargent, the conquest of US inflation is due to a subtle dynamic interaction of adaptive expectations, imperfect model forecasts and the monetary authorities' beliefs on the working of the economy. In this sense the Lucas Critique is ignored and Sargents advocates the vindication of econometric policy evaluation. Keywords: US inflation, monetary policy, adaptive expectations, self-confirming equilibrium, escape route