Flattening of the Phillips Curve: Implications for Monetary Policy

Author/Editor:

Dora M Iakova

Publication Date:

April 1, 2007

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 2007/076

Subject:

Inflation Inflation targeting Monetary policy Output gap Prices Production

English

Publication Date:

April 1, 2007

ISBN/ISSN:

9781451866407/1018-5941

Stock No:

WPIEA2007076

Pages:

19

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