The [un]importance of forward-looking behavior in price specifications

  title={The [un]importance of forward-looking behavior in price specifications},
  author={J. Fuhrer},
  journal={Journal of Money, Credit and Banking},
  • J. Fuhrer, J. Fuhrer
  • Published 1997
  • Economics
  • Journal of Money, Credit and Banking
  • The seminal work of Edmund S. Phelps (1978), John B. Taylor (1980), and Guillermo A. Calvo (1983) developed forward-looking models of price determination that imparted inertia to the price level. These models incorporate expectations of future prices and excess demand by imposing constraints (typically lag-lead symmetry constraints) that force future variables to enter the specification. In this paper, the author tests the empirical significance of future prices in specifications like those of… CONTINUE READING
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