The Phillips Curve: DYTVSC?

Marco Bassetto, Todd Messer, and Christine Ostrowski write,

the recovery of inflation in 2009–10 occurred precisely at the only time (since 1985) in which the statistical models considered here would predict sharp disinflation, that is, inflation went up at the time at which the models would most strongly predict that it should go down


the degree by which the statistical relationship between economic activity and output has become flatter—as well as the fact that models would often predict not only the wrong magnitude of the response of inflation, but also the wrong direction—may offer support to the idea of a vertical Phillips curve, where the determinants of (forecastable) inflation changes are unrelated to economic activity, such as in the model of Lucas (1972). This model would have diametrically opposed implications for policy, suggesting that (the
systematic component of) monetary policy can be most effective at controlling inflation, while having little or no direct impact on measures of economic activity

They did not visit the same country as Robert Gordon or Scott Sumner.

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