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6 - Understanding US Inflation Dynamics

Published online by Cambridge University Press:  28 March 2024

Jeremy B. Rudd
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Summary

A simple empirical model describing how U.S. inflation dynamics have evolved over the post-WWII period is constructed; the results are used to evaluate various interpretations and theories of the inflation process. Changes in the slope of the price Phillips curve and the relative stability of the wage Phillips curve are documented. Macro and micro evidence for the empirical role of inflation expectations in the inflation process is critiqued. The chapter also discusses supply shocks and whether there was "missing disinflation" after the 2007-2009 recession. Finally, empirical measures of aggregate price-cost margins are compared.

Keywords

Phillips curveprice and wage determinationinflation persistencePhillips curve slopeinflation expectationssupply shockslabor- and product-market slack"missing disinflation"
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A Practical Guide to Macroeconomics , pp. 146 - 192
Publisher: Cambridge University Press
Print publication year: 2024

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