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INFLATION IN THE G7: MIND THE GAP(S)?

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INFLATION IN THE G7: MIND THE GAP(S)? / Morley, James; Piger, Jeremy; Rasche, Robert.
In: Macroeconomic Dynamics, Vol. 19, No. 4, 06.2015, p. 883-912.

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Harvard

Morley, J, Piger, J & Rasche, R 2015, 'INFLATION IN THE G7: MIND THE GAP(S)?', Macroeconomic Dynamics, vol. 19, no. 4, pp. 883-912. https://doi.org/10.1017/S1365100513000655

APA

Morley, J., Piger, J., & Rasche, R. (2015). INFLATION IN THE G7: MIND THE GAP(S)? Macroeconomic Dynamics, 19(4), 883-912. https://doi.org/10.1017/S1365100513000655

Vancouver

Morley J, Piger J, Rasche R. INFLATION IN THE G7: MIND THE GAP(S)? Macroeconomic Dynamics. 2015 Jun;19(4):883-912. doi: 10.1017/S1365100513000655

Author

Morley, James ; Piger, Jeremy ; Rasche, Robert. / INFLATION IN THE G7: MIND THE GAP(S)?. In: Macroeconomic Dynamics. 2015 ; Vol. 19, No. 4. pp. 883-912.

Bibtex

@article{73a64b05c3e344a68ed51a2da6757f6d,
title = "INFLATION IN THE G7: MIND THE GAP(S)?",
abstract = "We investigate the importance of trend inflation and the real-activity gap in explaining inflation in G7 countries since 1960. Our analysis is based on a bivariate unobserved components model of inflation and unemployment in which inflation is decomposed into a stochastic trend and a transitory component. As in recent implementations of the New Keynesian Phillips Curve, it is the transitory component of inflation, or “inflation gap,” that is driven by the real-activity gap, which we measure as the deviation of unemployment from its natural rate. We find that both trend inflation and the inflation gap have been consistent and substantial determinants of inflation at business cycle horizons for all G7 countries since 1960. Also, the real-activity gap explains a large fraction of the variation in the inflation gap for each country. These results provide empirical support for the New Keynesian Phillips Curve augmented with trend inflation.",
keywords = "Inflation Persistence, Natural Rate, New Keynesian Phillips Curve, Trend Inflation",
author = "James Morley and Jeremy Piger and Robert Rasche",
year = "2015",
month = jun,
doi = "10.1017/S1365100513000655",
language = "English",
volume = "19",
pages = "883--912",
journal = "Macroeconomic Dynamics",
issn = "1365-1005",
publisher = "Cambridge University Press",
number = "4",

}

RIS

TY - JOUR

T1 - INFLATION IN THE G7: MIND THE GAP(S)?

AU - Morley, James

AU - Piger, Jeremy

AU - Rasche, Robert

PY - 2015/6

Y1 - 2015/6

N2 - We investigate the importance of trend inflation and the real-activity gap in explaining inflation in G7 countries since 1960. Our analysis is based on a bivariate unobserved components model of inflation and unemployment in which inflation is decomposed into a stochastic trend and a transitory component. As in recent implementations of the New Keynesian Phillips Curve, it is the transitory component of inflation, or “inflation gap,” that is driven by the real-activity gap, which we measure as the deviation of unemployment from its natural rate. We find that both trend inflation and the inflation gap have been consistent and substantial determinants of inflation at business cycle horizons for all G7 countries since 1960. Also, the real-activity gap explains a large fraction of the variation in the inflation gap for each country. These results provide empirical support for the New Keynesian Phillips Curve augmented with trend inflation.

AB - We investigate the importance of trend inflation and the real-activity gap in explaining inflation in G7 countries since 1960. Our analysis is based on a bivariate unobserved components model of inflation and unemployment in which inflation is decomposed into a stochastic trend and a transitory component. As in recent implementations of the New Keynesian Phillips Curve, it is the transitory component of inflation, or “inflation gap,” that is driven by the real-activity gap, which we measure as the deviation of unemployment from its natural rate. We find that both trend inflation and the inflation gap have been consistent and substantial determinants of inflation at business cycle horizons for all G7 countries since 1960. Also, the real-activity gap explains a large fraction of the variation in the inflation gap for each country. These results provide empirical support for the New Keynesian Phillips Curve augmented with trend inflation.

KW - Inflation Persistence

KW - Natural Rate

KW - New Keynesian Phillips Curve

KW - Trend Inflation

U2 - 10.1017/S1365100513000655

DO - 10.1017/S1365100513000655

M3 - Journal article

VL - 19

SP - 883

EP - 912

JO - Macroeconomic Dynamics

JF - Macroeconomic Dynamics

SN - 1365-1005

IS - 4

ER -