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Working Paper
The Anatomy of Single-Digit Inflation in the 1960s
Recently, the experience of the 1960s—when the U.S. inflation rate rose rapidly and persistently over a comparatively short period—has been invoked as a cautionary tale for the present. An analysis of this period indicates that the inflation regime that prevailed in the 1960s was different in several key regards from the one that prevailed on the eve of the pandemic. Hence, there are few useable lessons to be drawn from this experience, save that monetary policymaking remains a difficult undertaking.
Speech
Credible and Incredible Disinflations
St. Louis Fed President Jim Bullard talked about “credible” versus “incredible” disinflations during a panel discussion at “The Credibility of Government Policies: Conference in Honor of Guillermo Calvo” at Columbia University.He posed the question of whether the Fed will be able to return inflation to 2% relatively easily and quickly or whether a substantial recession will occur, as was the case under former Fed Chair Paul Volcker. Bullard noted that the Volcker disinflation was costly but “incredible”—initially, few believed that the Fed was serious about reducing ...
Working Paper
Inflation expectations and nonlinearities in the Phillips curve
This paper shows that a simple form of nonlinearity in the Phillips curve can explain why, following the Great Recession, inflation did not decrease as much as predicted by linear Phillips curves, a phenomenon known as the missing disinflation. We estimate a piecewise-linear specification and document that the data favor a model with two regions, with the response of inflation to an increase in unemployment slower in the region where unemployment is already high. Nonlinearities remain important, even when we account for other factors proposed in the literature, such as consumer expectations ...