The Great Recession and the Inflation Puzzle [electronic resource] / Troy Matheson.
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TextSeries: IMF Working Papers; Working Paper ; No. 13/124Publication details: Washington, D.C. : International Monetary Fund, 2013Description: 1 online resource (12 p.)ISBN: 1484334728 :ISSN: 1018-5941Subject(s): Forecasting and Other Model Applications | Forecasting and Simulation | Inflation Dynamics | Monetary Fund | Phillips Curve | Price Inflation | United StatesAdditional physical formats: Print Version:: The Great Recession and the Inflation PuzzleOnline resources: IMF e-Library | IMF Book Store Abstract: Notwithstanding persistently-high unemployment following the Great Recession, inflation in the United States has been remarkably stable. We find that a traditional Phillips curve describes the behavior of inflation reasonably well since the 1960s. Using a non-linear Kalman filter that allows for time-varying parameters, we find that three factors have contributed to the observed stability of inflation: inflation expectations have become better anchored and to a lower level; the slope of the Phillips curve has flattened; and the importance of import-price inflation has increased.
Notwithstanding persistently-high unemployment following the Great Recession, inflation in the United States has been remarkably stable. We find that a traditional Phillips curve describes the behavior of inflation reasonably well since the 1960s. Using a non-linear Kalman filter that allows for time-varying parameters, we find that three factors have contributed to the observed stability of inflation: inflation expectations have become better anchored and to a lower level; the slope of the Phillips curve has flattened; and the importance of import-price inflation has increased.
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