Documentos de trabajoNadim Elayan Balagué, Ayman El Dahrawy Sánchez-Albornoz
  • We study two recent episodes in which the evolution of inflation in the United States cannot be explained with a standard Phillips Curve framework. We refer to the first episode as missing disinflation (2009IV:2011IV), because observed inflation was higher than what the standard Phillips Curve predicts; and we call the second one missing inflation (2015I:2015II), because observed inflation was lower than predicted.
  • We replicate the model from Ball and Mazumder (2011) to obtain predictions of inflation and empirically identify the timing of the episodes. Then we extend the baseline model in various dimensions to identify the drivers of inflation in these episodes.
  • More specifically, we explore: the impact of shocks in energy prices by using inflation specifications that exclude this component, the role of inflation expectations, different measures of economic slack and the importance of structural factors that might be flattening the Phillips Curve, such as globalization.
  • We find that shocks in energy prices and globalization have an important role in the episodes of missing disinflation and missing inflation. Besides, we also find that the short-term unemployment rate, instead of the total unemployment rate, better captures the slack of the US economy and, hence, the ability of the Philips Curve to explain the evolution of inflation during both episodes improves.