We study the relation between inflation and real activity over the business cycle. We employ a Trend-Cycle VAR model to … control for low-frequency movements in inflation, unemployment, and growth that are pervasive in the post-WWII period. We show … that cyclical fluctuations of inflation are related to cyclical movements in real activity and unemployment, in line with …

other. In the standard model, inflation and output rise after interest rates rise, with only the possibility of a one …-time downward jump. With the generalized Lucas Phillips curve, inflation is initially unstable, so a small initial disinflation …

inflation behaves as if prices are nearly fully sticky (flexible). Using (conventional) measures of inflation that understate …

How costly is inflation to workers? Answers to this question have focused on the path of real wages during inflationary … periods. We argue that workers must take costly actions ("conflict") to have nominal wages catch up with inflation, meaning … there are welfare costs even if real wages do not fall as inflation rises. We study a menu-cost style model, where workers …

fraction of price changes increases with inflation. They also predict implausibly large menu costs and misallocation in the …