‘Global inflation gap’ points to slack across advanced economies – paper

inflation-road-sign

Measures of a “global inflation gap” suggest that economic slack persists across advanced economies, implying inflation is unlikely to undergo a sudden surge in the near future, according to a new paper published by the National Bureau of Economic Research.

An expectations-augmented Phillips curve is key to the result, write Olivier Coibion, Yuriy Gorodnichenko and Mauricio Ulate. Only when households and firms are allowed to base their decisions on expectations about the future does a

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