Flattening of the Phillips Curve: Implications for Monetary Policy

Dora Iakova

No 2007/076, IMF Working Papers from International Monetary Fund

Abstract: Over the past decade, inflation has become less responsive to domestic demand pressures in many industrial countries. This development has been attributed, in part, to globalization forces. A small macroeconomic model, estimated on UK data using Bayesian estimation, is used to analyze the monetary policy implications of this structural change. The focus is on the implications of a globalization-related flattening of the Phillips curve for the trade-off between inflation and output gap variability and for the efficient monetary policy response rule.

Keywords: WP; inflation expectation; Phillips curve; efficient monetary policy rules; globalization; interest rate rule; goods price inflation; output gap volatility; inflation shock; inflation equation; Inflation; Output gap; Inflation targeting (search for similar items in EconPapers)
Pages: 19
Date: 2007-04-01
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Citations: View citations in EconPapers (25)

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