Price Expectations in Rising Inflation PDF
Preview Price Expectations in Rising Inflation
PRICE EXPECTATIONS IN RISING INFLATION CONTRIBUTIONS TO ECONOMIC ANALYSIS 152 Honorary Editor J. TINBERGEN Editors D. W. JORGENSON J. WAELBROECK &§ NORTH-HOLLAND AMSTERDAM · NEW YORK · OXFORD PRICE EXPECTATIONS IN RISING INFLATION IGNAZIO VISCO Banca d'ltalia NH sp 1984 NORTH-HOLLAND AMSTERDAM · NEW YORK OXFORD © ELSEVIER SCIENCE PUBLISHERS B.V., 1984 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner. ISBN 0 444 86836 4 Publishers: ELSEVIER SCIENCE PUBLISHERS B.V. P.O. BOX 1991 1000 BZ AMSTERDAM THE NETHERLANDS Sole distributors for the U.S.A. and Canada: ELSEVIER SCIENCE PUBLISHING COMPANY, INC. 52 VANDERBILT AVENUE NEW YORK, N.Y. 10017 Library of Congress Cataloging in Publication Data Visco, Ignazio. Price expectations in rising inflation. (Contributions to economic analysis ; 152) Revision of thesis (Ph.D.)—University of Pennsylvania, 1981. Bibliography: p. Includes index. 1. Inflation (Finance) 2. Rational expectations (Economic theory) I. Title. II. Series. HG229.V57 1984 332.4Ί 83-27162 ISBN 0-444-86836-4 PRINTED IN THE NETHERLANDS INTRODUCTION TO THE SERIES This series consists of a number of hitherto unpublished studies, which are introduced by the editors in the belief that they represent fresh contribu- tions to economic science. The term "economic analysis" as used in the title of the series has been adopted because it covers both the activities of the theoretical economist and the research worker. Although the analytical methods used by the various contributors are not the same, they are nevertheless conditioned by the common origin of their studies, namely theoretical problems encountered in practical research. Since for this reason, business cycle research and national accounting, research work on behalf of economic policy, and problems of planning are the main sources of the subjects dealt with, they necessarily determine the manner of approach adopted by the authors. Their methods tend to be "practical" in the sense of not being too far remote from application to actual economic conditions. In addition they are quantitative rather than qualitative. It is the hope of the editors that the publication of these studies will help to stimulate the exchange of scientific information and to reinforce interna- tional cooperation in the field of economics. The Editors This page intentionally left blank To Bianca, Giuliana, Francesca, Caterina This page intentionally left blank PREFACE This study is a revised version of my Ph.D thesis submitted to the Univer- sity of Pennsylvania in 1981. Chapters 4 and 6 have been especially revised. Professors Albert K. Ando, Lawrence R. Klein and Roberto S. Mariano served as my dissertation committee and offered many comments and suggestions at various stages of this work. Professor Ando agreed to be my dissertation advisor. I am particularly indebted to him for his continuous interest in my progress, his advice, and his friendship. I am also very grateful to Professor Klein who always generously gave of his time to discuss the results of this study. Professor Mariano made many useful remarks not only during his reading of a first draft of this book but also during numerous discussions which helped to clarify my ideas and under- standing. I started to be interested in examining the process of expectations formation when I wrote my thesis for the Laurea in Economia e Commercio at the University of Rome in 1971, under the supervision of Professor Federico Caffè, to whom I will always be grateful. I first discovered the Mondo Economico surveys, which are the primary input to this work, while writing a paper for a course offered by professor F. Gerard Adams, during my first Ph.D. year at the University of Pennsylvania in 1972. Professor Adams offered at the time many suggestions which have proven fruitful during the years. When I returned to Italy after completion of my course requirements, in 1974, I started working in the research department of the Bank of Italy from which I took a leave of absence between July 1975 and January 1976. During this period I was back to Philadelphia, with a dissertation fellowship of the Economics Research Unit, to which I am grateful. The first chapters of this work were substantially conceived at that time. In 1977 I first met the late Bruno Pagani, the editor of Mondo Economics, and Gerolamo Fiori, the present editor. From them I learned many details on the surveys and obtained a precious body of data. With them and with my former colleague Vittorio Conti, presently of Banca Commerciale Italiana, there has been in the recent years a continuous cooperation which has led to the changes which have characterized the surveys. I am most grateful to the staff of Mondo Economico, and wish to express my admiration for having started in 1952 the collection of such useful information on expectations.
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