It's Baaack: The Surge in Inflation in the 2020s and the Return of the Non-Linear Phillips Curve / Pierpaolo Benigno, Gauti B. Eggertsson.

Format:

Book

Author/Creator:

Benigno, Pierpaolo.

Contributor:

National Bureau of Economic Research.

Eggertsson, Gauti B.

Series:

Working Paper Series (National Bureau of Economic Research) no. w31197.

NBER working paper series no. w31197

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2023.

Summary:

This paper proposes a non-linear New Keynesian Phillips curve (Inv-L NK Phillips Curve) to explain the surge of inflation in the 2020s. Economic slack is measured as firms' job vacancies over the number of unemployed workers. After showing empirical evidence of statistically significant nonlinearities, we propose a New Keynesian model with search and matching frictions, complemented by a form of wage rigidity, in the spirit of Phillips (1958), that generates strong nonlinearities. Policy implications include the thesis that appropriate monetary policy can bring inflation down without a significant recession and that the recent inflationary surge was mostly generated by a labor shortage -- i.e. an exceptionally tight labor market.

Notes:

Print version record

April 2023.