Working Paper: NBER ID: w13147
Authors: Frederic S. Mishkin
Abstract: This paper first outlines the key stylized facts about changes in inflation dynamics in recent years: 1) inflation persistence has declined, 2) the Phillips curve has flattened, and 3) inflation has become less responsive to other shocks. These changes in inflation dynamics are interpreted as resulting from an anchoring of inflation expectations as a result of better monetary policy. The paper then goes on to draw implications for monetary policy from this interpretation, as well as implications for inflation forecasts.
Keywords: No keywords provided
JEL Codes: E31; E50
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| inflation persistence has declined (E31) | better-anchored inflation expectations (E31) |
| better-anchored inflation expectations (E31) | inflation persistence has declined (E31) |
| Phillips curve has flattened (E31) | smaller implications for inflation (E31) |
| decrease in coefficient on unemployment gap (J64) | Phillips curve has flattened (E31) |
| inflation has become less responsive to other shocks (E31) | reduced sensitivity of inflation to external factors (E31) |
| improved monetary policy (E52) | better-anchored inflation expectations (E31) |
| improved monetary policy (E52) | inflation persistence has declined (E31) |