The Great Recession and the Inflation Puzzle

 
Author/Editor: Matheson, Troy ; Stavrev, Emil
 
Publication Date: May 22, 2013
 
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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: 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.
 
Series: Working Paper No. 13/124
Subject(s): Economic recession | United States | Inflation | Economic models

 
English
Publication Date: May 22, 2013
ISBN/ISSN: 9781484334720/2227-8885 Format: Paper
Stock No: WPIEA2013124 Pages: 12
Price:
US$18.00 (Academic Rate:
US$18.00 )
 
 
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