The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Inflation Dynamics

  • Timothy Cogley
Reference work entry


There have been a number of changes in monetary policy rules in the United States and UK since the early 1960s. The Lucas critique says that this should induce changes in the equilibrium law of motion. This article summarizes reduced-form evidence on the evolving law of motion for inflation in the USA and the UK. Since the 1970s, inflation has become lower on average, less volatile and less persistent. There is also less uncertainty about the central bank’s long-run target for inflation.


Bank of England Bretton Woods system Central-bank independence Commitment European Monetary System (EMU) Federal Reserve System Fixed exchange rates Greenspan, A. Inflation Inflation dynamics Inflation gap Inflation targeting Inflation volatility Lucas critique Monetary policy rules New Keynesian macroeconomics Output gap Phillips curve Prediction-error variance Sticky price models Supply shocks Taylor rule Thatcher, M. Trend inflation Vector autoregressions Volcker, P 

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Timothy Cogley
    • 1
  1. 1.