Open Journal of Business and Management

Volume 4, Issue 4 (October 2016)

ISSN Print: 2329-3284   ISSN Online: 2329-3292

Google-based Impact Factor: 0.94  Citations  

Is the Federal Reserve Learning? A New Simple Correlation of Inflation and Economic Stability Trends

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DOI: 10.4236/ojbm.2016.44059    1,406 Downloads   1,762 Views  
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ABSTRACT

The relatively recent (last few years) actions by the Federal Reserve and other economic factors have mitigated potential changes in unemployment rate. We examine the trends in economic inflation for the USA using the data and empirical models given in the recent paper by Yellen [1]. A new correlation for the inflation rate trend is developed based on Learning Theory. We may conclude that the Federal Reserve has learnt to control inflation rate via an implicit learning process, and has tempered the fluctuations in unemployment rate, which previously showed evidence of instability. The fluctuations and trends in unemployment do not show evidence of learning, and are fitted by a simple periodic dynamic expression with an underlying unemployment rate of 6.5%. Yellen [1] also discusses the role of “expectation” in forecasting and economic changes in policies and directions. This behavioral response to rule changes is clearly linked to the learning processes in society and by people, which are a fruitful topic for future research on economic predictions and for interpretive purposes.

Cite this paper

Duffey, R. (2016) Is the Federal Reserve Learning? A New Simple Correlation of Inflation and Economic Stability Trends. Open Journal of Business and Management, 4, 549-557. doi: 10.4236/ojbm.2016.44059.

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