Flattening of the Phillips Curve: Implications for Monetary Policy
April 1, 2007
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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.
Subject: Inflation, Inflation targeting, Monetary policy, Output gap, Prices, Production
Keywords: efficient monetary policy rules, globalization, goods price inflation, Inflation, inflation equation, inflation expectation, inflation shock, Inflation targeting, interest rate rule, Output gap, output gap volatility, Phillips curve, WP
Pages:
19
Volume:
2007
DOI:
Issue:
076
Series:
Working Paper No. 2007/076
Stock No:
WPIEA2007076
ISBN:
9781451866407
ISSN:
1018-5941
