Journal Article
A Growth-Augmented Phillips Curve
Abstract: Empirical studies find that the link between inflation and economic slack has weakened in recent decades, a development that could hamper monetary policymakers as they aim to achieve their inflation objective. We show that while the role of economic slack has diminished, economic growth has become a significant driver of inflation dynamics, indicating that the link between inflation and economic activity remains but the relevant gauge of activity has changed. The new evidence suggests that the COVID-19-related recession could induce substantial disinflationary pressure.
https://doi.org/10.26509/frbc-ec-202016
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https://doi.org/10.26509/frbc-ec-202016
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Bibliographic Information
Provider: Federal Reserve Bank of Cleveland
Part of Series: Economic Commentary
Publication Date: 2020-07-02
Volume: 2020
Issue: 16
Pages: 6