The Phillips Curve and Inflation

My slides for the SF Fed Symposium, “The Future of Inflation”:  While the reduced-form Phillips Curve appears near death, this can be explained by structural factors and the links between inflation and resource utilization are alive and well.

A lot of related research is reviewed, including reduced-form empirical work (Ball and Mazumder (2011)Blanchard (2016)), the literature on inflation and long-term unemployment (Ball and Mazumder (2014)Kiley (2015)), lack of participation as slack (Erceg and Levin (2014)), DSGE models (Del Negro, Giannoni, and Schorfheide (2015)Christiano, Eichenbaum, and Trabandt (2015)Chung, Herbst, and Kiley (2015)), and expectations (Coibion and Gorodnichenko (2015)Kiley (2016)).

Risks Associated with Low Inflation

Recent papers from the Federal Reserve on

The factors that influence the degree to which low inflation impedes economic performance: Arias, Erceg, and Trabandt (2016)

The interaction of the zero-lower bound on nominal interest rates and the expected rate of inflation in a standard class of macroeconomic models: Hills, Nakata, and Schmidt (2016)

How effective is quantitative easing in stimulating economic activity and raising inflation?

My main research contributions on this topic have now each been published.

Quantitative easing lowers Treasury and corporate bond yields, but the pass through to corporate bond yields is more modest than that associated with a lower federal funds rate: Kiley (2016)

As a result, overall financial conditions improve by less with quantitative easing than with similar movements in the federal funds rate: Kiley (2014a)

And this evidence is consistent with the more limited stimulus associated with long-term interest rates relative to short-term interest rates: Kiley (2014b)