Cleveland Fed paper looks for reasons for flatter Phillips curve

A more aggressive monetary policy response to economic activity could be flattening the Phillips curve, a paper published by the Federal Reserve Bank of Cleveland finds.

In an economic letter, Filippo Occhino examines business-cycle behaviour and monetary policy responses to try to understand the underlying causes of the flattening Phillips curve.

He finds that when a central bank responds more to economic conditions than inflation, the output gap becomes less volatile.

This is because the

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