Is the Phillips Curve Alive and Well after All? Inflation Expectations and the Missing Disinflation

Olivier Coibion and Yuriy Gorodnichenko

American Economic Journal: Macroeconomics, 2015, vol. 7, issue 1, 197-232

Abstract: We evaluate explanations for the absence of disinflation during the Great Recession and find popular explanations to be insufficient. We propose a new explanation for this puzzle within the context of a standard Phillips curve. If firms' inflation expectations track those of households, then the missing disinflation can be explained by the rise in their inflation expectations between 2009 and 2011. We present new econometric and survey evidence consistent with firms having similar expectations as households. The rise in household inflation expectations from 2009 to 2011 can be explained by the increase in oil prices over this time period. (JEL D84, E24, E32, E52, E58, Q35)

JEL-codes: D84 E24 E32 E52 E58 Q35 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/mac.20130306
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Citations: View citations in EconPapers (570)

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Related works:
Chapter: Is The Phillips Curve Alive and Well After All? Inflation Expectations and the Missing Disinflation (2013)
Working Paper: Is The Phillips Curve Alive and Well After All? Inflation Expectations and the Missing Disinflation (2013)
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