Globalisation is helping to flatten Phillips curve – Fed paper
Price sensitivity to output changes is significantly weaker in high trade-intensive industries
The increased exposure of the US economy to international trade reduced the responsiveness of inflation to output, a paper from the Federal Reserve finds.
“Increased trade exposure significantly attenuates the response of inflation to fluctuations in output across industries,” Simon Gilchrist and Egon Zakrajsek say.
In the paper, the researchers examine US trade data against industry-level prices, wages, employment and production from 1963 to 2017.
The extent to which prices respond to
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