Global Slack as a Determinant of U.S. Inflation

Bank for International Settlements, 2013. "Globalisation and inflation dynamics in Asia and the Pacific," BIS Papers, Bank for International Settlements, number 70, May.

6 Pages Posted: 9 Dec 2013

See all articles by Enrique Martínez-García

Enrique Martínez-García

Federal Reserve Bank of Dallas - Research Department

Mark A. Wynne

Federal Reserve Bank of Dallas

Multiple version iconThere are 2 versions of this paper

Date Written: August 1, 2012

Abstract

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

Keywords: Global Slack Hypothesis, New Keynesian Model, Inflation

JEL Classification: E3, F4

Suggested Citation

Martinez-Garcia, Enrique and Wynne, Mark A., Global Slack as a Determinant of U.S. Inflation (August 1, 2012). Bank for International Settlements, 2013. "Globalisation and inflation dynamics in Asia and the Pacific," BIS Papers, Bank for International Settlements, number 70, May. , Available at SSRN: https://ssrn.com/abstract=2365046 or http://dx.doi.org/10.2139/ssrn.2365046

Enrique Martinez-Garcia (Contact Author)

Federal Reserve Bank of Dallas - Research Department ( email )

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HOME PAGE: http://sites.google.com/view/emgeconomics

Mark A. Wynne

Federal Reserve Bank of Dallas ( email )

PO Box 655906
Dallas, TX 75265-5906
United States
214-922-5159 (Phone)
214-922-5194 (Fax)

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