What the study found
The study found that the effects of U.S. monetary policy on inflation have strengthened over time, while the Phillips curve—a relationship linking inflation and economic slack—flattened over much of the pre-pandemic period. It also found that short- to long-horizon inflation expectations became less connected, which the authors describe as consistent with more firmly anchored expectations and improved policy credibility.
Why the authors say this matters
The authors conclude that these findings matter because they suggest the transmission of U.S. monetary policy has changed since inflation targeting began. They also suggest that Phillips curve dynamics are regime dependent, meaning the relationship can vary across periods, including the post-pandemic inflation surge.
What the researchers tested
The researchers used a machine learning framework to study how U.S. monetary policy transmission has changed over time since inflation targeting. They estimated time-varying parameter local projections using ridge regression, which is a regression method that helps handle many related parameters, and they accounted for heteroskedasticity, meaning changing variability across parameters.
What worked and what didn't
Their approach captured gradual shifts in macroeconomic relationships. The results showed stronger time-varying effects of monetary policy on inflation and a flatter Phillips curve over much of the pre-pandemic period, along with diminished pass-through from short- to long-horizon inflation expectations. They also documented a temporary steepening of the Phillips curve during the post-pandemic inflation surge.
What to keep in mind
The abstract does not describe specific data limits or other caveats beyond the fact that the analysis is centered on the U.S. and the period since inflation targeting. It also does not provide details on robustness checks or alternative explanations.
Key points
- The study found stronger effects of U.S. monetary policy on inflation over time.
- The Phillips curve was flatter over much of the pre-pandemic period.
- Inflation expectations became less connected from short to long horizons.
- A temporary steepening of the Phillips curve appeared during the post-pandemic inflation surge.
- The authors say the findings suggest Phillips curve dynamics depend on the regime or period.
Disclosure
- Research title:
- Monetary policy effects on inflation strengthened as the Phillips curve flattened
- Authors:
- Dooyeon Cho, Jaehun Jung
- Institutions:
- Irvine University, Sungkyunkwan University, University of California, Irvine
- Publication date:
- 2026-04-02
- OpenAlex record:
- View
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