The Great Recession and the Inflation Puzzle
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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.
Series:
Working Paper No. 2013/124
Subject:
Financial crises Global financial crisis of 2008-2009 Hyperinflation Import prices Inflation Labor Prices Unemployment Unemployment rate
English
Publication Date:
May 22, 2013
ISBN/ISSN:
9781484334720/1018-5941
Stock No:
WPIEA2013124
Pages:
12
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