Accounting for Post-Crisis Inflation and Employment: A Retro Analysis

Harald Uhlig () and Chiara Fratto

No 10306, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Why was there no deflation and what accounts for inflation after 2008? We use the prominent pre-crisis Smets-Wouters (2007) model to address this question. We find that due to price markup shocks alone inflation would have been 1%higher than observed and 0.5% higher that the long-run average. Their standard deviation is similar to its pre-crisis level. Price markup shocks were also responsible for the slow recovery of employment, though not for the initial drop. Monetary policy shocks predict an inflation rate 0.5% below average. Government expenditure innovations do not contribute much either to inflation or to employment dynamics

JEL-codes: E31 E32 E52 (search for similar items in EconPapers)
Date: 2014-12
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (17)

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Working Paper: Accounting for Post-Crisis Inflation and Employment: A Retro Analysis (2014)
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