The object of this paper is to assess the role of supply shocks, labour market tightness and expectation formation in explaining bouts of inflation. We begin by showing that a quasi-flat Phillips curve, which was popular prior to the pandemic, still fits the post-2020 US data well and that...

We introduce a form of downward nominal wage rigidity that can vary in intensity across a continuum of labor varieties. The model delivers a static wage Phillips curve linking current wage inflation to current unemployment. For standard parameterizations, the dynamics of the model are...

This paper derives the curvature properties of the short-run Phillips curve in a class of canonical models of price-setting frictions. Contrary to conventional thinking, the Phillips curve is asymptotically horizontal for high levels of economic activity and asymptotically vertical for low...

We show that, in a broad class of menu cost models, the dynamics of aggregate inflation in response to arbitrary shocks to aggregate costs are nearly the same as in Calvo models with suitably chosen Calvo adjustment frequencies. We first prove that the canonical menu cost model is first-order...

The US and other advanced countries suffered bursts of severe inflation in 2021 and the first half of 2022, followed by declines of inflation later in 2022, in some countries. In times of high volatility of price determinants--cost and productivity--inflation can jump upward and fall downward at...

We use a unique high-frequency micro-dataset to estimate the slope of the primitive form of the New Keynesian Phillips curve, which features marginal cost as the relevant real activity variable. Our dataset encompasses product-level prices, costs, and output within the Belgian manufacturing...

We propose that the natural rate of unemployment has an active role in the business cycle, in contrast to the prevailing view that the rate is essentially constant. We demonstrate that this tendency to treat the natural rate as near-constant would explain the surprisingly low slope of the...

We revisit time-variation in the Phillips curve, applying new Bayesian panel methods with breakpoints to US and European Union disaggregate data. Our approach allows us to accurately estimate both the number and timing of breaks in the Phillips curve. It further allows us to determine the...

A parsimonious model of shifting policy regimes can simultaneously capture expected and actual US inflation during 1969-2005. Our model features a forward-looking New Keynesian Phillips curve and purposeful policymakers that can or cannot commit. Private sector learning about policymaker type...

We explore a hypothesis about the take-off in inflation that occurred in the early 1970s. According to the expectations trap hypothesis, the Fed was pushed into producing the high inflation out of a fear of violating the public's inflation expectations. We compare this hypothesis with the...