Changing inflation dynamics, evolving monetary policy: an overview
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Date
2020
Authors
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Journal ISSN
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Publisher
Banco Central de Chile
Abstract
Understanding the dynamics of inflation has become an important challenge for both policymakers and researchers over the past decade. Empirical models linking inflation and economic activity—versions of the so-called Phillips curve—have failed to account for the behavior of inflation in many advanced economies. In particular, inflation in the U.S. and other countries was higher during the 2008-2009 Great Recession than the conventional empirical Phillips curve would imply. As noted by some economists, this “missing deflation” phenomenon may have already started in the mid-2000s. Just as puzzling, during the subsequent recovery, inflation has remained subdued relative to the predictions generated by existing models, despite the aggressive expansionary monetary policies implemented in many advanced economies.
Description
Understanding the dynamics of inflation has become an important
challenge for both policymakers and researchers over the past decade.
Empirical models linking inflation and economic activity—versions of
the so-called Phillips curve—have failed to account for the behavior of
inflation in many advanced economies. In particular, inflation in the U.S.
and other countries was higher during the 2008-2009 Great Recession
than the conventional empirical Phillips curve would imply. As noted by
some economists, this “missing deflation” phenomenon may have already
started in the mid-2000s. Just as puzzling, during the subsequent
recovery, inflation has remained subdued relative to the predictions
generated by existing models, despite the aggressive expansionary
monetary policies implemented in many advanced economies.
Keywords
INFLACIÓN, POLÍTICA MONETARIA