Download or read book Did the Global Financial Crisis Break the U.S. Phillips Curve? written by Stefan Laseen and published by International Monetary Fund. This book was released on 2016-09-07 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: Inflation dynamics, as well as its interaction with unemployment, have been puzzling since the Global Financial Crisis (GFC). In this empirical paper, we use multivariate, possibly time-varying, time-series models and show that changes in shocks are a more salient feature of the data than changes in coefficients. Hence, the GFC did not break the Phillips curve. By estimating variations of a regime-switching model, we show that allowing for regime switching solely in coefficients of the policy rule would maximize the fit. Additionally, using a data-rich reduced-form model we compute conditional forecast scenarios. We show that financial and external variables have the highest forecasting power for inflation and unemployment, post-GFC.