When the central banker’s loss function is asymmetric, changes in the volatility of inflation and/or unemployment affect equilibrium inflation. This suggests that changing macroeconomic volatilities may be an important driving force behind trends in observed inflation. Previous evidence, which...

Recent theoretical work shows that changes in the volatility of inflation and/or unem-ployment affect equilibrium in°ation outcomes when the central banker's loss functionis asymmetric. We show that previous evidence offered in support of the propositionthat the volatility of unemployment helps...

Inflation rates in a number of OECD follow a common trend over the past four decades: inflation starts out low in the 1960s, rises for a time before peaking in the 1970s or early 1980s, and then falls back to initial levels. This similarity in the behavior of trend inflation suggests that any...

Recent work on U.S. data calls into question the ability of simple Phillips curvemodels to forecast inflation. This paper asks whether there is similar evidence of abreakdown in the forecasting ability of Phillips curve models in other OECD countries.The results suggests that the ability of a...