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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