Regime Shifts in U.S. Trend Inflation: Pre-Volcker to Post-Great Moderation

Ruopu Hu, Junior Maith () and Shin-Ichi Nishiyama
Additional contact information
Junior Maith: Norges Bank
Shin-Ichi Nishiyama: Graduate School of Economics, Kobe University

No 2604, Discussion Papers from Graduate School of Economics, Kobe University

Abstract: We revisit U.S. trend inflation dynamics since the 1960s by estimating a nonlinear, nonstationary Markov-switching New Keynesian model in which trend inflation evolves as a latent Markov process. Our estimation (i) confirms the Volcker disinflation as a regime shift from high to mid-level trend inflation between 1980 and 1987; (ii) shows that trend inflation remained stable around 2.8% during the Great Moderation and beyond, despite major disruptions such as the Global Financial Crisis and the COVID-19 pandemic; and (iii) identifies a persistent hawkish monetary policy regime after 1982, with temporary weakening during periods of policy rate reductions at the zero lower bound—while inflation expectations remained well anchored.

Keywords: Trend Inflation; Markov-Switching DSGE; Volcker Disinflation; Great Moderation. (search for similar items in EconPapers)
JEL-codes: C54 E31 E52 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2026-03
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2026/2604.pdf First version, 2026 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:koe:wpaper:2604

Access Statistics for this paper

More papers in Discussion Papers from Graduate School of Economics, Kobe University Contact information at EDIRC.
Bibliographic data for series maintained by Kimiaki Shirahama ( this e-mail address is bad, please contact ).