Inflation persistence, inflation targeting and the Great Moderation

Charles T. Carlstrom, Timothy S. Fuerst () and Matthius Paustian

No 721, Working Paper from Federal Reserve Bank of Cleveland

Abstract: There is growing evidence that the empirical Phillips curve within the US has changed significantly since the early 1980’s. In particular, inflation persistence has declined sharply. The paper demonstrates that this decline is consistent with a standard Dynamic New Keynesian (DNK) model in which: (i) the variability of technology shocks has declined, and (ii) the central bank more aggressively responds to inflation.

Keywords: Inflation (Finance); Phillips curve; Inflation targeting (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2007

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Persistent link: http://EconPapers.repec.org/RePEc:fip:fedcwp:0721

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