Does the global output gap matter?

The emergence of an academic stalemate in the 1980s between neo-classical and new Keynesian theories of the causes of short-term fluctuations in inflation no doubt came as some relief to the guardians of price stability. To be sure, there were still quarrels over whether or not real and nominal rigidities resulted in multiple equilibria in the short run, or whether observed fluctuations were the result of an optimal response to real shocks. But broadly speaking, practitioners of the art of ce