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Will inflation remain low?

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Abstract

The well-known Phillips curve suggests that future inflation depends on current and past inflation and a measure of economic slack or resource utilization. Using the unemployment gap to measure slack, a simple Phillips curve currently predicts that inflation will remain quite low through 2015. Two variations of the model, which impose a higher anchor for inflation expectations or focus only on a short-term unemployment gap, still predict that inflation will remain low, albeit higher than implied by the basic model.

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  • Yifan Cao & Adam Hale Shapiro, 2014. "Will inflation remain low?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfel:00021
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    References listed on IDEAS

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    1. Robert J. Gordon, 2013. "The Phillips Curve is Alive and Well: Inflation and the NAIRU During the Slow Recovery," NBER Working Papers 19390, National Bureau of Economic Research, Inc.
    2. Michael D. Bauer & Jens H. E. Christensen, 2014. "Financial market outlook for inflation," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
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