Presenter: Oliver Pfäuti Affiliation: University of Texas at Austin and University of Bern, Department of Economics. Paper: The Inflation Attention Threshold and Inflation Surges Date: October 17, 2023 Time: 12:00 GMT (15:00 Israel Time) Abstract: At the outbreak of the recent inflation surge, the public’s attention to inflation was low but increased rapidly once inflation … Read more
We estimate the slope of the Phillips curve in the cross section of U.S. states using newly constructed state-level price indexes for non-tradeable goods back to 1978. Our estimates indicate that the Phillips curve is very flat and was very flat even during the early 1980s. We estimate only a modest decline in the slope of the Phillips curve since the 1980s. We use a multi-region model to infer the slope of the aggregate Phillips curve from our regional estimates. Applying our estimates to recent unemployment dynamics yields essentially no missing disinflation or missing reinflation over the past few business cycles. Our results imply that the sharp drop in core inflation in the early 1980s was mostly due to shifting expectations about long-run monetary policy as opposed to a steep Phillips curve, and the greater stability of inflation since the 1990s is mostly due to long-run inflationary expectations becoming more firmly anchored.