Core PCE vs Core CPI: A Record Gap Opens
Core PCE vs core CPI has inverted by 0.72 points, the widest in 425 months, and the Fed acts on...
Inflation
Inflation can have a significant impact on the economy, and what policymakers can do to keep it under control.
US Inflation Is the Highest in the Rich World
US inflation is 3.46 percent, the highest of the four big rich economies. Everyone bought oil from the same market,...
The Lucas Critique Applied to Inflation Models
The Lucas critique explains why every major Phillips Curve breakdown since 1970 was predictable. Reduced-form inflation models inherit the policy...
Cost-Push vs Demand-Pull: A Modern Reassessment
The cost-push vs demand-pull framework still organizes inflation discussions, but modern episodes mix both forces. Expectations and markups complicate the...
Inflation Persistence: Why Past Inflation Drives Future Inflation
Inflation persistence measures how strongly past inflation drives future inflation. It collapsed after the Volcker disinflation and rebounded modestly during...
Sacrifice Ratio: Output Cost of Disinflation
The sacrifice ratio measures the output lost per percentage point of inflation reduction. The 1980s episodes produced ratios near 1.5;...
Wage-Price Spirals: Theory, Evidence, 1970s vs 2022
Wage-price spirals require wage indexation, weak monetary anchors, and unanchored expectations. The 1970s satisfied all three; 2022 did not. The...
Stagflation Explained: When Inflation and Recession Hit Together
Stagflation explained: the macroeconomic configuration in which inflation and recession arrive together, breaking the standard policy trade-off and binding central...
Inflation vs Hyperinflation: How High Does Inflation Have to Get?
Inflation vs hyperinflation is not just a difference of degree. Cagan's 50%-per-month threshold marks the point at which money itself...
Inflation Pass-Through Exchange Rates: How Currency Moves Reach Domestic Prices
Inflation pass-through exchange rates explains how currency depreciation moves through import prices, producer costs, consumer inflation, and expectations.