The Great Recession and the Inflation Puzzle

13 Pages Posted: 18 Jun 2013

See all articles by Troy Matheson

Troy Matheson

Government of New Zealand - Department of Economics

Emil Stavrev

International Monetary Fund (IMF)

Date Written: May 2013

Abstract

Notwithstanding persistently-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.

Keywords: Economic recession, United States, Inflation, Economic models, inflation, Unemployment, Phillips Curve, price inflation, inflation dynamics, monetary fund, monetary policy, inflation targeting, gdp deflator, relative price, inflation rate

JEL Classification: C53, E37

Suggested Citation

Matheson, Troy and Stavrev, Emil, The Great Recession and the Inflation Puzzle (May 2013). IMF Working Paper No. 13/124, Available at SSRN: https://ssrn.com/abstract=2280630

Troy Matheson (Contact Author)

Government of New Zealand - Department of Economics ( email )

2 The Terrace
P.O. Box 2498
Wellington
New Zealand

Emil Stavrev

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
93
Abstract Views
623
Rank
502,806
PlumX Metrics