We explain the role of the Phillips Curve in the analysis of the economic outlook and the formulation of monetary policy at the ECB. First, revisiting the structural Phillips Curve, we highlight the challenges in recovering structural parameters from reduced-form estimates and relate the...

We develop a theoretical model that features a business cycle-dependent relation between out- put, price inflation and inflation expectations, augmenting the model by Svensson (1997) with a nonlinear Phillips curve that reflects the rationale underlying the capacity constraint theory (Macklem...

We develop a theoretical model that features a business cycle-dependent relation between output, price inflation and inflation expectations, augmenting the model by Svensson (1997) with a nonlinear Phillips curve that reflects the rationale underlying the capacity constraint theory (Macklem...

This paper studies factors behind inflation dynamics in the euro area, the UK and the US. It introduces a factor-augmented vector autoregression (FAVAR) framework with sign restrictions to study the effects of fundamental macroeconomic shocks on inflation in the three economies. The FAVAR model...

In this paper we report results on inflation persistence using 79 inflation series covering the EU countries, the euro area and the US for five different inflation variables. The picture that emerges is one of moderate inflation persistence across the board. In particular we find euro area...

The business cycle is alive and well, and real variables respond to it more or less as they always did. Witness the Great Recession. Inflation, in contrast, has gone quiescent. This paper studies the sources of this disconnect using VARs and an estimated DSGE model. It finds that the disconnect...

We explain the role of the Phillips Curve in the analysis of the economic outlook and the formulation of monetary policy at the ECB. First, revisiting the structural Phillips Curve, we highlight the challenges in recovering structural parameters from reduced-form estimates and relate the...

In this paper we incorporate a labor market with matching frictions and wage rigidities into the New Keynesian business cycle model. In particular, we analyze the effect of a monetary policy shock and investigate how labor market frictions affect the transmission process of monetary policy. The...

Assigning a discretionary central bank a mandate to stabilize an average inflation rate—rather than a period-by-period inflation rate—increases welfare in a New Keynesian model with an occasionally binding lower bound on nominal interest rates. Under rational expectations, the...

Under inflation targeting inflation exhibits negative serial correlation in the United Kingdom, and little or no persistence in Canada, Sweden and New Zealand, and estimates of the indexation parameter in hybrid New Keynesian Phillips curves are either equal to zero, or very low, in all...