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Author: Laurence M. Ball
Publisher: International Monetary Fund
ISBN: 1455263389
Category : Business & Economics
Languages : en
Pages : 58
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Book Description
This paper examines inflation dynamics in the United States since 1960, with a particular focus on the Great Recession. A puzzle emerges when Phillips curves estimated over 1960-2007 are ussed to predice inflation over 2008-2010: inflation should have fallen by more than it did. We resolve this puzzle with two modifications of the Phillips curve, both suggested by theories of costly price adjustment: we measure core inflation with the median CPI inflation rate, and we allow the slope of the Phillips curve to change with the level and vairance of inflation. We then examine the hypothesis of anchored inflation expectations. We find that expectations have been fully "shock-anchored" since the 1980s, while "level anchoring" has been gradual and partial, but significant. It is not clear whether expectations are sufficiently anchored to prevent deflation over the next few years. Finally, we show that the Great Recession provides fresh evidence against the New Keynesian Phillips curve with rational expectations.
Author: Laurence M. Ball
Publisher: International Monetary Fund
ISBN: 1455263389
Category : Business & Economics
Languages : en
Pages : 58
Get Book Here
Book Description
This paper examines inflation dynamics in the United States since 1960, with a particular focus on the Great Recession. A puzzle emerges when Phillips curves estimated over 1960-2007 are ussed to predice inflation over 2008-2010: inflation should have fallen by more than it did. We resolve this puzzle with two modifications of the Phillips curve, both suggested by theories of costly price adjustment: we measure core inflation with the median CPI inflation rate, and we allow the slope of the Phillips curve to change with the level and vairance of inflation. We then examine the hypothesis of anchored inflation expectations. We find that expectations have been fully "shock-anchored" since the 1980s, while "level anchoring" has been gradual and partial, but significant. It is not clear whether expectations are sufficiently anchored to prevent deflation over the next few years. Finally, we show that the Great Recession provides fresh evidence against the New Keynesian Phillips curve with rational expectations.
Author: Andreas Hornstein
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 14
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Book Description
Author: Khalirendwe Ranenyeni
Publisher:
ISBN:
Category : Keynesian economics
Languages : en
Pages : 46
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Book Description
Author: Jean-Marie Dufour
Publisher: Montréal : CIRANO
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 23
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Book Description
"The authors use identification-robust methods to assess the empirical adequacy of a New Keynesian Phillips curve (NKPC) equation. They focus on Gal ̀•and Gertler's (1999) specification, for both U.S. and Canadian data. Two variants of the model are studied: one based on a rational-expectations assumption, and a modification to the latter that uses survey data on inflation expectations. The results based on these two specifications exhibit sharp differences concerning: (i) identification difficulties, (ii) backward-looking behaviour, and (iii) the frequency of price adjustment. Overall, the authors find that there is some support for the hybrid NKPC for the United States, whereas the model is not suited to Canada. Their findings underscore the need for employing identification-robust inference methods in the estimation of expectations-based dynamic macroeconomic relations."--Abstract from website.
Author: Ichiro Muto
Publisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 52
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Book Description
We estimate a New Keynesian Phillips curve (NKPC) for Japan's economy. To obtain a better proxy of real marginal cost (RMC), we correct labor share by incorporating labor adjustment costs, material prices, and real wage rigidity. Our approach is unique in utilizing the information on firms' judgment about the labor gap, which implies the existence of labor adjustment costs. Our results show that the NKPC explains Japanese inflation dynamics quite well if we use the corrected proxy of RMC. Furthermore, we find that Japanese inflation persistence is mostly accounted for by the persistence of RMC itself rather than lagged inflation.--Publisher's description.
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Author: Jean-Marie Dufour
Publisher: CIRANO
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 22
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Book Description
Author: Borek Vasicek
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Author: Jean-Marie Dufour
Publisher:
ISBN: 9782893825168
Category : Econometrics
Languages : en
Pages : 0
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Book Description
Author: Ravi Balakrishnan
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 32
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Book Description
This paper aims to improve the understanding of U.S. inflation dynamics by separating out structural from cyclical effects using frequency domain techniques. Most empirical studies of inflation dynamics do not distinguish between secular and cyclical movements, and we show that such a distinction is critical. In particular, we study traditional Phillips curve (TPC) and new Keynesian Phillips curve (NKPC) models of inflation, and conclude that the long-run secular decline in inflation cannot be explained in terms of changes in external trade and global factor markets. These variables tend to impact inflation primarily over the business cycle. We infer that the secular decline in inflation may well reflect improved monetary policy credibility and, thus, maintaining low inflation in the long run is closely linked to anchored inflation expectations.
