Anchoring inflation eases deflation risks: IMF paper
An IMF paper published in June finds evidence that suggests well-anchored inflation expectations reduce the risk of a deflationary spiral forming.
Laurence Ball and Sandeep Mazumder, the paper's authors, use a Phillips curve to estimate inflation dynamics in the US from 1960. They examine inflation expectations over the period, as previous estimates using the Phillips curves over the period show inflation has fallen by more than expected during 2008 and 2010.
The authors find evidence suggesting
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