NY Fed paper identifies labour slack threshold
A New York Federal Reserve paper published on Friday finds evidence that labour market slack must exceed a certain threshold before exerting pressure on inflation.
Richard Peach, Robert Rich, and Anna Cororaton, the paper's authors, estimate a Phillips curve model using US data on inflation and unemployment to examine the output gap and the relationship between resource utilisation and inflation.
The authors note that while existing theory suggests that inflation increases when an economy is
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