The Great Inflation Drift
---- Acknowledgements -----
The paper was prepared for "The Great Inflation Conference" sponsored by the National Bureau of Economic Research in Woodstock, Vermont, September 25-27, 2008. The paper benefitted from preliminary presentations at the June 2007 Kiel Symposium "The Phillips Curve and the Natural Rate of Unemployment," the June 2008 North American Econometric Society Summer Meetings, and a July 2008 seminar at the Federal Reserve Bank of New York. The ideas were developed initially in a paper prepared for the November 2004 Carnegie Rochester Policy Conference. The paper also benefitted from presentations at Cornell University, the Federal Reserve Bank of Kansas City, the Institute for International Economic Studies at Stockholm University, and the Swedish Riksbank. We thank Susanto Basu for providing us with a time series on aggregate technical change, Torsten Persson, Mathias Trabandt and Michael Woodford for valuable discussions on related matters, Michael Siemer for research assistance, and Lars Svensson for discussing our paper at the conference. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.