IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/33234.html

How Curvy is the Phillips Curve?

Author

Listed:
  • Philip Bunn
  • Lena Anayi
  • Emily Barnes
  • Nicholas Bloom
  • Paul Mizen
  • Gregory Thwaites
  • Ivan Yotzov

Abstract

Macro evidence suggests a convex relationship between inflation and slack, but causal identification is challenging. Using large firm-panel surveys in the UK and US, we show that price responses to demand shocks are convex at the firm level, across hypothetical survey shocks, realised sales shocks, and COVID-induced demand shocks. Convexity is strongest when firms and industries face higher inflation, fades beyond two years, and applies to cost shocks. We rationalise these findings with a menu-cost model in which trend inflation moves firms closer to price-increase thresholds. We estimate that this nonlinearity explains about one quarter of the 2022 inflation overshoot.

Suggested Citation

  • Philip Bunn & Lena Anayi & Emily Barnes & Nicholas Bloom & Paul Mizen & Gregory Thwaites & Ivan Yotzov, 2024. "How Curvy is the Phillips Curve?," NBER Working Papers 33234, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:33234
    Note: ME
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w33234.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    More about this item

    JEL classification:

    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:33234. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.