Understanding Post-COVID Inflation Dynamics

Martín Harding, Jesper Lindé & Mathias Trabandt
We propose a macroeconomic model with a nonlinear Phillips curve that has a flat slope when inflationary pressures are subdued and steepens when inflationary pressures are elevated. The nonlinear Phillips curve in our model arises due to a quasi-kinked demand schedule for goods produced by firms. Our model can jointly account for the modest decline in inflation during the Great Recession and the surge in inflation post-COVID-19. Because our model implies a stronger transmission of...

Registration Year

  • 2022
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Affiliations

  • Halle Institute for Economic Research
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  • Goethe University Frankfurt
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  • Centre for Economic Policy Research
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  • Bank of Canada
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  • International Monetary Fund
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