12 November 2013
Why Didn’t Inflation Fall More During the Great Recession?
Olivier Coibion and Yuriy Gorodnichenko suggest that inflation did not fall by as much as many Phillips curve models suggest that it should have fallen during the Great Recession because firms, like households, had inflation expectations that increased between 2009 and 2011. They attribute the rise in household inflationary expectations during this period to increases in oil prices.
( ...more... )