A Phillips Curve with Anchored Expectations and Short-Term Unemployment
By Laurence Ball, Sandeep Mazumder. Journal of Money, Credit and Banking, 2015
173 citations recorded by the source corpus.
This paper examines the recent behavior of core inflation in the United States. We specify a simple Phillips curve based on the assumptions that inflation expectations are fully anchored at the Federal Reserve’s target, and that labor-market slack is captured by the level of shortterm unemployment. This equation explains inflation behavior since 2000, including the failure of high total unemployment since 2008 to reduce inflation greatly. The fit of our equation is especially good when we measure core inflation with the Cleveland Fed’s series on weighted median inflation. We also propose a more general Phillips curve in which core inflation depends on short-term unemployment and on expected inflation as measured by the Survey of Professional Forecasters. This specification fits U.S. inflation since 1985, including both the anchored-expectations period of the 2000s and the preceding period when expectations were determined by past levels of inflation.
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/d9cb7e54d381ef81beb826dca23b7d5da83e464f
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Citations in the corpus
- The Slope of the Phillips Curve: Evidence from U.S. States (2020, background): “Important recent publications estimating the Phillips curve include Ball and Mazumder (2011, 2019), Coibion and Gorodnichenko (2015), Stock and Watson (2019), Barnichon and Mesters (2020), and Del Negro et al. (2020).”