TY  - JOUR
AU  - Svensson, Lars E.O.
TI  - The Possible Unemployment Cost of Average Inflation below a Credible Target
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 19442
PY  - 2013
Y2  - September 2013
DO  - 10.3386/w19442
UR  - http://www.nber.org/papers/w19442
L1  - http://www.nber.org/papers/w19442.pdf
N1  - Author contact info:
Lars E.O. Svensson
Department of Economics
Stockholm School of Economics
P.O. Box 6501
SE-11383 Stockholm
Sweden
E-Mail: Leosven@gmail.com
M1  - published as Lars E. O. Svensson. "The Possible Unemployment Cost of Average Inflation below a Credible Target," in Mark Gertler, organizer, "Lessons from the Financial Crisis for Monetary Policy" American Economic Journal: Macroeconomics, Volume 7, no. 1 (2015)

AB  - If inflation expectations become firmly anchored at the inflation target even when average inflation deviates from the target, the long-run Phillips curve becomes non-vertical. During 1997-2011, average inflation expectations in Sweden have been close to the inflation target of 2 percent, whereas average inflation has fallen short of the target by 0.6 percentage points. The estimates reported suggest that the slope of the long-run Phillips curve is about 0.75. Then the average unemployment rate has been about 0.8 percentage points higher than if average inflation had been on target. This is a large unemployment cost of undershooting the inflation target.
ER  -