Publication

This paper interprets US macroeconomic developments since 1955 in order to test two hypotheses about the source of the sacrifice ratio. Economic costs associated with the delibarate change of inflationary trends, according to the hypotheses, may be due to the stickiness of inflation or a learning process of private actors. The author finds that, first, allowing for learning reduces the evidence for sticky inflation. Second, there is less evidence for sticky inflation in the post-1983 period than earlier. The author suggests that for realistic models, the sacrifice ratio can be accounted for entirely by learning.