Journal Article

Implications of structural changes in the U.S. economy for pricing behavior and inflation dynamics

Abstract: Some key features of the behavior of inflation in the United States appear to have changed in the past 20 years, with potentially important implications for forecasters and policymakers. Recent studies have provided evidence of a decline in both the variability and persistence of inflation. ; Such shifts in the behavior or dynamics of inflation would necessitate changes in the economic relationships used by policymakers and economists to assess current conditions, forecast key economic indicators, and determine the implications of policy changes for future economic activity. ; Willis examines how structural changes in the economy over the past two decades may have affected the price-setting behavior of firms and, in turn, the behavior of aggregate inflation. He concludes that structural changes in the economy over the past 20 years have likely contributed to a decrease in the persistence and volatility of inflation.

Keywords: Prices; Inflation (Finance);

Bibliographic Information

Provider: Federal Reserve Bank of Kansas City

Part of Series: Economic Review

Publication Date: 2003

Volume: 88

Issue: Q I

Pages: 5-27