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The Great Recession and the inflation puzzle

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  • Matheson, Troy
  • Stavrev, Emil

Abstract

Notwithstanding 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.

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File URL: http://www.sciencedirect.com/science/article/pii/S0165176513002747
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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 120 (2013)
Issue (Month): 3 ()
Pages: 468-472

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Handle: RePEc:eee:ecolet:v:120:y:2013:i:3:p:468-472

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Inflation; Unemployment; Phillips curve;

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References

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  1. James H. Stock & Mark W. Watson, 2010. "Modeling Inflation After the Crisis," NBER Working Papers 16488, National Bureau of Economic Research, Inc.
  2. Sandeep Mazumder & Laurence M. Ball, 2011. "Inflation Dynamics and the Great Recession," IMF Working Papers 11/121, International Monetary Fund.
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Cited by:
  1. Jaromir Baxa & Miroslav Plasil & Borek Vasicek, 2013. "Inflation and the Steeplechase Between Economic Activity Variables," Working Papers 2013/15, Czech National Bank, Research Department.

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