Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/229014
Authors: 
Eser, Fabian
Karadi, Peter
Lane, Philip R.
Moretti, Laura
Osbat, Chiara
Year of Publication: 
2020
Series/Report no.: 
ECB Working Paper No. 2400
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
We explain the role of the Phillips Curve in the analysis of the economic outlook and the formulation of monetary policy at the ECB. First, revisiting the structural Phillips Curve, we highlight the challenges in recovering structural parameters from reduced-form estimates and relate the reduced-form Phillips Curve to the (semi-)structural models used at the ECB. Second, we identify the slope of the structural Phillips Curve by exploiting cross-country variation and by using high-frequency monetary policy surprises as instruments. Third, we present reduced-form evidence, focusing on the relation between slack and in ation and the role of in ation expectations. In relation to the recent weakness of in ation, we discuss the role of firm profits in the pass-through from wages to prices and the contribution of external factors. Overall, the available evidence supports the view that the absorption of slack and a firm anchoring of in ation expectations remain central to successful in ation stabilisation.
Subjects: 
Inflation
Phillips Curve
Monetary Policy
European Central Bank
JEL: 
E31
E52
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-4043-6
Document Type: 
Working Paper

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