Is The Phillips Curve Alive and Well After All? Inflation Expectations and the Missing Disinflation
We evaluate possible explanations for the absence of a persistent decline in inflation during the Great Recession and find commonly suggested explanations to be insufficient. We propose a new explanation for this puzzle within the context of a standard Phillips curve. If firms' inflation expectations track those of households, then the missing disinflation can be explained by the rise in their inflation expectations between 2009 and 2011. We present new econometric and survey evidence consistent with firms having similar expectations as households. The rise in household inflation expectations from 2009 to 2011 can be explained by the increase in oil prices over this time period.
-
-
Copy CitationOlivier Coibion and Yuriy Gorodnichenko, "Is The Phillips Curve Alive and Well After All? Inflation Expectations and the Missing Disinflation," NBER Working Paper 19598 (2013), https://doi.org/10.3386/w19598.Download Citation
Published Versions
Is The Phillips Curve Alive and Well After All? Inflation Expectations and the Missing Disinflation, Olivier Coibion, Yuriy Gorodnichenko. in Lessons from the Financial Crisis for Monetary Policy, Gertler. 2015
Olivier Coibion & Yuriy Gorodnichenko, 2015. "Is the Phillips Curve Alive and Well after All? Inflation Expectations and the Missing Disinflation," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(1), pages 197-232, January. citation courtesy of 
Related
More from the NBER
In addition to working papers, the NBER disseminates affiliates’ latest findings through a range of free periodicals—the NBER Reporter, the NBER Digest, the Bulletin on Health, the Bulletin on the Economics of Alzheimer's, and the Bulletin on Entrepreneurship—as well as research spotlights, lectures, and panel videos.
