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Monetary Policy When the Phillips Curve Is Quite Flat

Beaudry, P; Hou, C; Portier, F; (2024) Monetary Policy When the Phillips Curve Is Quite Flat. American Economic Journal: Macroeconomics , 16 (1) pp. 1-28. 10.1257/mac.20220088. Green open access

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Abstract

This paper highlights how the presence of a monetary policy cost channel can offer new insights into the relation between monetary policy and inflation when the Phillips curve is quite flat. For instance, we highlight a key condition whereby lax monetary policy can push the economy to a low-inflation trap, and we discuss how, under the same condition, standard policy rules targeting inflation may need to be modified. In the empirical part of the paper, we explore the rele-vance of the condition that gives rise to these observations. The results support the key condition we emphasize.

Type: Article
Title: Monetary Policy When the Phillips Curve Is Quite Flat
Open access status: An open access version is available from UCL Discovery
DOI: 10.1257/mac.20220088
Publisher version: https://doi.org/10.1257/mac.20220088
Language: English
Additional information: This version is the version of record. For information on re-use, please refer to the publisher’s terms and conditions.
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/10188549
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