Global slack as a determinant of U.S. inflation

Enrique Martínez García () and Mark Wynne

No 123, Globalization Institute Working Papers from Federal Reserve Bank of Dallas

Abstract: Resource utilization, or \\"slack,\\" is widely held to be an important determinant of inflation dynamics. As the world has become more globalized in recent decades, some have argued that the concept of slack that is relevant is global rather than domestic (the \\"global slack hypothesis\\"). This line of argument is consistent with standard New Keynesian theory. However, the empirical evidence is fragile, at best, possibly because of a disconnect between empirical and theory-consistent measures of output gaps.

Keywords: Globalization; Macroeconomics (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-mac
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