The Great Recession and the Inflation Puzzle

May 22, 2013

Preview Citation

Format: Chicago

Troy D Matheson, and Emil Stavrev. The Great Recession and the Inflation Puzzle, (USA: International Monetary Fund, 2013) accessed November 9, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Financial crises, Global financial crisis of 2008-2009, Hyperinflation, Import prices, Inflation, Labor, Prices, Unemployment, Unemployment rate

Keywords: Global financial crisis of 2008-2009, Hyperinflation, Import prices, Import-price inflation, Inflation, Inflation expectation, Inflation in the United States, Inflation puzzle, Phillips Curve, Unemployment, Unemployment rate, WP, Year-over-year headline CPI inflation

Publication Details

Pages:

12
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/124
Stock No:

WPIEA2013124
ISBN:

9781484334720
ISSN:

1018-5941

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