Many observers suggest that the "globalization" of the U.S. economy has changed the behavior of inflation. This essay examines this idea, focusing on several questions: (1) Has globalization reduced the long-run level of inflation? (2) Has it affected the structure of inflation dynamics, as...

This paper studies the welfare effects of the relative price variability arising from inflation. When agents interact in anonymous markets, with customers buying from new suppliers each period, relative price variability benefits customers and cannot harm suppliers substantially. But if...

We present a model in which workers' aspirations for wage increases adjust slowly to shifts in productivity growth. The model yields a Phillips curve with a new variable: the gap between productivity growth and an average of past wage growth. Empirically, this variable shows up strongly in the...

This paper investigates the determinants of the "sacrifice ratio" for disinflation: the ratio of the loss in output to the fall in trend inflation. I develop a method for estimating the sacrifice ratio in individual disinflation episodes, and apply it to 65 episodes in moderate-inflation OECD...

This paper discusses the NAIRU -- the non-accelerating inflation rate of unemployment. It first considers the role of the NAIRU concept in business cycle theory, arguing that this concept is implicit in any model in which monetary policy influences both inflation and unemployment. The exact...

This paper asks why the NAIRU rose in most OECD countries in the 1980s. I find that a central cause was the tight monetary policy used to reduce inflation. The evidence comes from a cross-country comparison: countries with larger decreases in inflation and longer disinflationary periods have...

This paper presents a model of a high-inflation economy. The model includes the government budget constraint and money demand equation of Cagan's 1956 model; an accelerationist Phillips curve that captures inflation inertia; and an aggregate-spending equation that accounts for the effects of the...

Sticky-price models with rational expectations fail to capture the inertia in U.S. inflation. Models with backward-looking expectations capture current inflation behavior, but are unlikely to fit other monetary regimes. This paper seeks to overcome these problems with a near-rational model of...

This paper examines inflation dynamics in the United States since 1960, with a particular focus on the Great Recession. A puzzle emerges when Phillips curves estimated over 1960-2007 are used to predict inflation over 2008-2010: inflation should have fallen by more than it did. We resolve this...

This paper examines the recent behavior of core inflation in the United States. We specify a simple Phillips curve based on the assumptions that inflation expectations are fully anchored at the Federal Reserve’s target, and that labor-market slack is captured by the level of short-term...