Economics, Econometrics and Finance
4 years ago

Trend inflation alters US price change predictions, data shows discrepancies.

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RePEc: Research Papers in Economics
Relative Prices as Aggregate Supply Shocks with Trend Inflation
David Demery, Nigel W. Duck

Paper Summary

The study modified a model to explain US price changes by considering trend inflation. Even with mild positive trend inflation like 3% per year in the US, the model's predictions change significantly. However, some of these predictions are not supported by US data after World War II.

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