What’s up with the Phillips Curve?

Marco Del Negro, Michele Lenza, Giorgio Primiceri and Andrea Tambalotti

No 27003, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The business cycle is alive and well, and real variables respond to it more or less as they always did. Witness the Great Recession. Inflation, in contrast, has gone quiescent. This paper studies the sources of this disconnect using VARs and an estimated DSGE model. It finds that the disconnect is due primarily to the muted reaction of inflation to cost pressures, regardless of how they are measured—a flat aggregate supply curve. A shift in policy towards more forceful inflation stabilization also appears to have played some role by reducing the impact of demand shocks on the real economy. The evidence rules out stories centered around changes in the structure of the labor market or in how we should measure its tightness.

JEL-codes: E31 E32 E37 E52 (search for similar items in EconPapers)
Date: 2020-04
New Economics Papers: this item is included in nep-dge, nep-mac and nep-mon
Note: EFG ME
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Citations: View citations in EconPapers (5)

Published as Marco Del Negro & Michele Lenza & Giorgio E. Primiceri & Andrea Tambalotti, 2020. "What's Up with the Phillips Curve?," Brookings Papers on Economic Activity, vol 2020(1), pages 301-373.

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Journal Article: What's Up with the Phillips Curve? (2020)
Working Paper: What's up with the Phillips Curve? (2020)
Working Paper: What’s up with the Phillips Curve? (2020)
Working Paper: What’s Up with the Phillips Curve? (2020)
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