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The Great Recession and the inflation puzzle

Troy Matheson () and Emil Stavrev ()

Economics Letters, 2013, vol. 120, issue 3, 468-472

Abstract: 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)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:120:y:2013:i:3:p:468-472

DOI: 10.1016/j.econlet.2013.06.001

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