It’s Baaack: The Surge in Inflation in the 2020s and the Return of the Non-Linear Phillips Curve

Benigno, Pierpaolo; Eggertsson, Gauti (2023). It’s Baaack: The Surge in Inflation in the 2020s and the Return of the Non-Linear Phillips Curve (NBER working paper series 31197).

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This paper proposes a non-linear New Keynesian Phillips curve (Inv-L NK Phillips Curve) to ex-plain 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 non-linearities, 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.

Item Type:

Working Paper

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Economics

UniBE Contributor:

Benigno, Pierpaolo

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

Series:

NBER working paper series

Language:

English

Submitter:

Julia Alexandra Schlosser

Date Deposited:

31 Oct 2023 08:45

Last Modified:

31 Oct 2023 08:45

BORIS DOI:

10.48350/188357

URI:

https://boris.unibe.ch/id/eprint/188357

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