Why Inflation Expectations Matter A Lot For Theory — Brian Romanchuk

The fallout from the Rudd article on inflation expectations (that I described here) is still percolating around the internet. Duncan Weldon just wrote “We Have No Theory of Inflation” which discusses the issues from the empirical side. In this article, I am re-writing and expanding on some points that I noted in my previous article. If inflation expectations do not behave as predicted by neoclassical models, that is a critical problem that cannot be easily dealt with by adding epicycles to the models.

The Rudd article is turning into a courtier declaring that the emperor has no clothes. 

Bond Economics
Why Inflation Expectations Matter A Lot For Theory
Brian Romanchuk