Journal Article
Forecasts and sunspots: looking back for a better future
Abstract: To head off inflation before it gets started, central banks must use forecasts to determine monetary policy actions. But doing so introduces the possibility that inflation will increase just because the public expects it to. This Economic Commentary explains how random events (sunspots) can affect economic systems and create price volatility. The authors suggest that sunspots can be avoided with an approach that responds predominantly to past, rather than predicted, inflation.
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Bibliographic Information
Provider: Federal Reserve Bank of Cleveland
Part of Series: Economic Commentary
Publication Date: 1999
Issue: Nov
Order Number: 1