Changing inflation dynamics, evolving monetary policy
Empirical models have failed to explain inflation behavior over the last 20 years in most developed economies. The unusual inflation dynamics—the ‘missing deflation’ during recessions and the ‘missing inflation’ during recoveries—points to a failure of Phillips curve predictions. Several hypotheses have been proposed to explain the ‘twin puzzle’ phenomenon while at the same time have imposed challenging implications to conduct monetary policy. It is of utmost importance to understand the challenges for monetary policy conduct in an environment where inflation dynamics is hard to unravel. This volume contributes to the study of the ‘twin puzzle’ phenomenon and the challenges facing monetary policy. It gathers a selective group of distinguished scholars and policy makers to discuss the latest academic findings on inflation dynamics.Changing Inflation Dynamics, Evolving Monetary Policy: An Overview / Gonzalo Castex, Jordi Galí, and Diego Saravia -- The Passthrough of Large-cost Shocks in an Inflationary Economy / Fernando Álvarez and Pablo Andrés Neumeyer -- The Nonpuzzling Behavior of Median Inflation / Laurence Ball and Sandeep Mazumder -- The Link between Labor Cost Inflation and Price Inflation in the Euro Area / Elena Bobeica, Matteo Ciccarelli, and Isabel Vansteenkiste -- Has the U.S. Wage Phillips Curve Flattened? / Jordi Galí and Luca Gambetti -- Trade Exposure and the Evolution of Inflation Dynamics / Simon Gilchrist and Egon Zakrajšek -- The Supply-Side Origins of U.S. Inflation / Bart Hobijn -- Inflation Globally / Òscar Jordà and Fernanda Nechio -- Trend, Seasonal, and Sectorial Inflation in the Euro Area / James H. Stock and Mark W. Watson.
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