A1240
Title: The international dimension of trend inflation
Authors: Luca Fosso - European Central Bank (Germany) [presenting]
Guido Ascari - De Nederlandsche Bank and University of Pavia (Netherlands)
Abstract: Since 2000, US inflation has remained below target and silent to domestic slack. A trend-cycle BVAR decomposition shows that starting from the 90s, despite well-anchored expectations, slow-moving imported "cost-push" factors induced disinflationary pressure, keeping trend inflation below target. The cycle block provides evidence of a flattened Phillips curve, mainly attributable to a weaker wage pass-through. The business cycle behavior of inflation is determined by a shock originating abroad, associated with the bulk of volatility in the international prices of intermediate inputs and poorly connected to the domestic slack.
