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Inflation globally

Jorda, Óscar; Nechio, Fernanda (Banco Central de Chile, 2020)

The fortunes of the Phillips curve have ebbed and flowed ever since it was proposed by Phillips (1958). Although its origins are primarily as an empirical regularity, there is now a vast literature that provides more ...

The supply-side origins of U.S. inflation

Hobijn, Bart (Banco Central de Chile, 2020)

In recent years, we have not seen much of a negative correlation between inflation, the time series plotted in figure 1, and measures of resource slack, based on real GDP plotted in figure 2. This flattening of the ...

Trade exposure and the evolution of inflation dynamics

Gilchrist, Simon; Zakrajsek, Egon (Banco Central de Chile, 2020)

The Phillips curve—the relationship between price inflation and fluctuations in economic activity— is a central building block of economic models that allow for nominal rigidities and are relied upon by central banks ...

Has the U.S. wage phillips curve flattened? A semi-structural exploration

Galí, Jordi; Gambetti, Luca (Banco Central de Chile, 2020)

The deep and prolonged recession triggered by the global financial crisis of 2007–2009 led to a large increase in the unemployment rate in most advanced economies. Ten years later, at the time of writing this paper, the ...

The link between labor cost inflation and price inflation in the Euro Area

Bobeica, Elena; Ciccarelli, Matteo; Vansteenkiste, Isabel (Banco Central de Chile, 2020)

To gauge inflationary pressures, policymakers generally pay close attention to labor cost developments. A key reason has been the widely held view that labor cost inflation (i.e., wage inflation adjusted for productivity ...

The nonpuzzling behavior of median inflation

Ball, Laurence; Mazumder, Sandeep (Banco Central de Chile, 2020)

For decades, textbooks have explained inflation behavior with Friedman (1968)’s Phillips curve: the inflation rate depends on expected inflation and the deviation of unemployment from its natural rate. Yet this theory ...

The passthrough of large-cost shocks in an inflationary economy

Álvarez, Fernando; Neumeyer, Pablo Andrés (Banco Central de Chile, 2020)

This paper surveys and modestly extends the theory of menu-cost models of the behavior of the aggregate price level after large-cost shocks. It does so in the context of an economy with a high underlying rate of inflation. ...

Changing inflation dynamics, evolving monetary policy: an overview

Castex, Gonzalo; Galí, Jordi; Saravia, Diego (Banco Central de Chile, 2020)

Understanding the dynamics of inflation has become an important challenge for both policymakers and researchers over the past decade. Empirical models linking inflation and economic activity—versions of the so-called ...