Characterizing Stagflation into Mild, Moderate and Severe Episodes

Azhar Iqbal and Nicole Cervi

World Economics, 2024, vol. 25, issue 1, 9-30

Abstract: The study proposes a new framework to classify stagflation into mild, moderate, or severe episodes based on the magnitude and duration of high inflation and low-output growth. It uses the CPI and PCE deflators as inflation measures, real GDP as output growth measure, and a time-varying benchmark for growth and inflation to account for the changing nature of the US economy. The article identifies 13 episodes of stagflation from 1947 to Q1-2024, with five mild, four moderate, and four severe cases. The current episode (Q2-2021 to Q1-2024) is severe and the second-longest in history. The findings use Bloomberg's consensus projections to estimate the end of the current stagflation episode by Q1-2024, and discuss the policy implications and lessons from past episodes.

Date: 2024
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