Global Slack as a Determinant of US Inflation

6 Pages Posted: 14 Apr 2013

Date Written: February 1, 2013


Resource utilisation, or “slack”, is widely held to be an important determinant of inflation dynamics. As the world has become more globalised in recent decades, some have argued that the relevant concept of slack should be global rather than domestic (the “global slack hypothesis”). This line of argument is consistent with standard New Keynesian theory. However, the empirical evidence is, at best, fragile possibly because of a disconnect between empirical and theory-consistent measures of output gaps.

Full publication: Globalisation and Inflation Dynamics in Asia and the Pacific

Keywords: Global slack, open-economy Phillips curve, inflation

JEL Classification: E3, F4

Suggested Citation

Settlements, Bank for International, Global Slack as a Determinant of US Inflation (February 1, 2013). BIS Paper No. 70j, Available at SSRN:

Bank for International Settlements (Contact Author)

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