Flattening of the Phillips Curve: Implications for Monetary Policy

April 1, 2007

Preview Citation

Format: Chicago

Dora M Iakova. Flattening of the Phillips Curve: Implications for Monetary Policy, (USA: International Monetary Fund, 2007) accessed September 19, 2024

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.

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

Publication Details

Pages:

19
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2007/076
Stock No:

WPIEA2007076
ISBN:

9781451866407
ISSN:

1018-5941

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