Growth has replaced slack in Phillips curve relationship – Cleveland Fed paper

UK inflation

Output growth has replaced the output gap as the proper gauge of economic activity in the Phillips curve, researchers from the Federal Reserve Bank of Cleveland find.

The results suggest that the current recession could induce “substantial disinflationary pressure that may prove to be persistent”, Kristen Tauber and Willem Zandweghe say. They estimate that inflation could fall to 0.7% by the first quarter of 2021 and recover to 1.4% by the end of 2021. 

They use a model where firms and

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