Observations that the Phillips curve may be deviating from historical norms are important to policymakers because deviations would imply that more or less output has to be sacrificed to achieve a permanent reduction in long-term inflation. But we argue that recent economic shocks and a shift in...

An explanation of P-Star, evaluating its usefulness both as an indicator of potential inflation and as a method of assessing the Federal Reserve's long-term goal of price stability.

Is inflation (in the often-quoted words of Milton Friedman) "always and everywhere a monetary phenomenon"? Some say no, arguing that inflation is controlled not only by the central bank but also by the fiscal authority. This Commentary authors explore their argument, known as the fiscal theory...

Central banks have done a very impressive job of achieving low and stable rates of inflation in recent years. But despite past successes, they must always be ready to deal with new challenges that might arise. Sandra Pianalto, president and CEO of the Federal Reserve Bank of Cleveland, discusses...

We add a nominal tax system to a sticky-price monetary business cycle model. When nominal interest income is taxed, the coefficient on inflation in a Taylor-type monetary policy rule must be significantly larger than one in order for the model economy to have a determinate rational expectations...

An abstract for this article is not available.

Central banks pay close attention to inflation expectations. In standard models, however, inflation expectations are tied down by the assumption of rational expectations and should be of little independent interest to policy makers. In this paper, we relax the assumption of rational expectations...