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Why Inflation Expectations Matter A Lot For Theory — Brian Romanchuk

Summary:
The fallout from the Rudd article on inflation expectations (that I described here) is still percolating around the internet. Duncan Weldon just wrote “We Have No Theory of Inflation” which discusses the issues from the empirical side. In this article, I am re-writing and expanding on some points that I noted in my previous article. If inflation expectations do not behave as predicted by neoclassical models, that is a critical problem that cannot be easily dealt with by adding epicycles to the models.The Rudd article is turning into a courtier declaring that the emperor has no clothes.  Bond Economics Why Inflation Expectations Matter A Lot For TheoryBrian Romanchuk

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The fallout from the Rudd article on inflation expectations (that I described here) is still percolating around the internet. Duncan Weldon just wrote “We Have No Theory of Inflation” which discusses the issues from the empirical side. In this article, I am re-writing and expanding on some points that I noted in my previous article. If inflation expectations do not behave as predicted by neoclassical models, that is a critical problem that cannot be easily dealt with by adding epicycles to the models.
The Rudd article is turning into a courtier declaring that the emperor has no clothes. 

Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

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