Unstable Economy Looms as Inflation Expectations Shift Away from Rationality
The article explores how people's expectations about inflation can impact how well monetary policy works. By looking at how people learn and adapt their expectations, the researchers found that when people's expectations are not based on all the available information, it can make the economy less stable. They also discovered that having a clear and stable target for inflation helps keep the economy on track. Overall, the study shows that how people form their expectations can have a big impact on how well monetary policy works.