Is There an Inflation Puzzle?

[...]This article explores the inflation puzzle andinvestigates whether compensation has acted as either atemporary restraint on inflation or as the underlying sourceof a new inflation regime.2 After reviewing the recent behavior of inflation, we specify and estimate a traditionalprice-inflation Phillips curve model over the 1965-96period. Our results show that in late 1993 the modelbegins to systematically overpredict inflation and appearsto break down.[...]