The Great Recession and the Inflation Puzzle

Troy Matheson () and Emil Stavrev

No 2013/124, IMF Working Papers from International Monetary Fund

Abstract: Notwithstanding persistently-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: WP; inflation expectation; Inflation; Unemployment; Phillips Curve; import-price inflation; year-over-year headline CPI inflation; inflation puzzle; inflation in the United States; Global financial crisis of 2008-2009; Hyperinflation; Import prices; Unemployment rate (search for similar items in EconPapers)
Pages: 12
Date: 2013-05-22
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Citations: View citations in EconPapers (51)

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Journal Article: The Great Recession and the inflation puzzle (2013)
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