The Great Recession and the inflation puzzle
Troy Matheson () and
Emil Stavrev ()
Economics Letters, 2013, vol. 120, issue 3, 468-472
Notwithstanding high unemployment following the Great Recession, inflation in the United States has been remarkably stable. We find that a traditional Phillips curve describes the behavior of inflation reasonably well since the 1960s. Using a non-linear Kalman filter that allows for time-varying parameters, we find that three factors have contributed to the observed stability of inflation: inflation expectations have become better anchored and to a lower level; the slope of the Phillips curve has flattened; and the importance of import-price inflation has increased.
Keywords: Inflation; Unemployment; Phillips curve (search for similar items in EconPapers)
JEL-codes: C53 E37 (search for similar items in EconPapers)
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