Abstract
An influential paper by Clarida, Gal´i and Gertler (2000) has attributed the great inflation of the 1970 to the violation of the Taylor principle in the conduct of US monetary policy (weak, indeterminacy inducing response to expected inflation). We evaluate this thesis in the context of a standard NK model against a version of the model that incorporates incomplete information-learning about the true state of the economy. The likelihood-based estimation of the model overwhelmingly favors the specification with indeterminacy over the alternatives with determinacy, independent of the presence and size of mis-perceptions. JEL class: E32, E52
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