Kara, Engin; Pirzada, Ahmed Jamal - 2015
During the Great Recession, despite the large fall in output, inflation did not fall much. This is known as the missing … deflation puzzle. In this paper, we develop and estimate a New Keynesian Dynamic Stochastic General Equilibrium model to provide … inflation during the Great Recession. We show that inflation did not fall much because intermediate goods prices were increasing …