The Impact of Globalization and Digitalization on the Phillips Curve
Globalization is in retreat, yet digitalization is on the rise. How will these trends impact inflation?
E31 - Price Level; Inflation; Deflation
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On the Wedge Between the PPI and CPI Inflation Indicators
We find that the CPI and PPI inflation indexes co-moved strongly throughout the late 20th century, but their correlation has fallen substantially since the early 2000s. We offer a structural explanation for this divergence based on the growth of global supply chains since 2000. This finding offers a unique perspective for the future design of optimal monetary policy. -
What to Target? Insights from a Lab Experiment
In a laboratory experiment, we ask participants to predict inflation using three different policy regimes: inflation targeting—with and without greater communication of the target—average inflation targeting and price level targeting. We use participants’ predictions to compare the level and stability of inflation under each regime. -
What Can Stockouts Tell Us About Inflation? Evidence from Online Micro Data
Did supply disruptions and cost pressures play a role in rising inflation in 2020 during the COVID-19 pandemic? Using data collected from websites of large retailers in multiple sectors and countries, we show that shortages may indicate transitory inflationary pressures. -
Exploring the potential benefits of inflation overshooting
After a period with the interest rate at the effective lower bound, temporarily overshooting inflation may offer important economic benefits. This may be especially true for vulnerable segments of the population, such as workers with low attachment to the labour force and the long-term unemployed. -
Adoption of Digital Technologies: Insights from a Global Survey Initiative
Firms are at the forefront of adopting new technology. Using survey data from a global network of central banks, we assess the effects of digitalization on firms’ pricing and employment decisions. -
(Optimal) Monetary Policy with and without Debt
How should policy be designed at high debt levels, when fiscal authorities have little room to adjust taxes? Assigning the monetary authority a role in achieving debt sustainability makes it less effective in stabilizing inflation and output. -
The Determinants of Consumers’ Inflation Expectations: Evidence from the US and Canada
We compare the determinants of consumer inflation expectations in the US and Canada by analyzing two current surveys. We find that Canadian consumers rely more on professional forecasts and the history of actual inflation when forming their expectations, while US consumers rely more on their own lagged expectations. -
Has the Inflation Process Changed? Selective Review of Recent Research on Inflation Dynamics
From 2011 to 2019, inflation in Canada and advanced economies usually registered below inflation targets, spurring the debate on whether the inflation process has changed. This paper highlights emerging questions that will influence the conduct of monetary policy in Canada in the near term. -
Understanding Trend Inflation Through the Lens of the Goods and Services Sectors
The goods and services sectors have experienced considerably different dynamics over the past three decades. Our goal in this paper is to understand how such contrasting behaviors at the sectoral level affect the aggregate level of trend inflation dynamics.