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Federal Reserve Bank of Cleveland
Working Papers (Old Series)
Inflation persistence, inflation targeting and the Great Moderation
Charles T. Carlstrom
Timothy S. Fuerst
Matthias Paustian
Abstract

There is growing evidence that the empirical Phillips curve within the US has changed significantly since the early 1980’s. In particular, inflation persistence has declined sharply. The paper demonstrates that this decline is consistent with a standard Dynamic New Keynesian (DNK) model in which: (i) the variability of technology shocks has declined, and (ii) the central bank more aggressively responds to inflation.


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Charles T. Carlstrom & Timothy S. Fuerst & Matthias Paustian, Inflation persistence, inflation targeting and the Great Moderation, Federal Reserve Bank of Cleveland, Working Papers (Old Series) 0721, 2007.
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Keywords: Inflation (Finance) ; Phillips curve ; Inflation targeting
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