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Explaining apparent changes in the Phillips curve: trend inflation isn't constant

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  • Charles T. Carlstrom
  • Timothy S. Fuerst

Abstract

Monetary policymakers look to the Phillips curve—an expression of the relationship between inflation and the degree to which the economy is operating relative to its potential—for information about the cost of actions undertaken to lower inflation. Recent estimations of the curve suggest it is deviating from historical norms. We argue that changes in trend inflation and Fed operating procedures are not being taken into account in these estimations and that when they are, changes in the curve are minor and need not concern policymakers.

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File URL: http://www.clevelandfed.org/research/commentary/2008/0108.pdf
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Bibliographic Info

Article provided by Federal Reserve Bank of Cleveland in its journal Economic Commentary.

Volume (Year): (2008)
Issue (Month): Jan ()
Pages:

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Handle: RePEc:fip:fedcec:y:2008:i:jan

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Keywords: Phillips curve ; Inflation (Finance);

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