TY - BOOK ID - 134274669 TI - Understanding Post-COVID Inflation Dynamics AU - Harding, Martin. AU - Lindé, Jesper. AU - Trabandt, Mathias. PY - 2023 PB - Washington, D.C. : International Monetary Fund, DB - UniCat KW - Macroeconomics KW - Economics: General KW - Inflation KW - Production and Operations Management KW - Banks and Banking KW - Economic Theory KW - Money and Monetary Policy KW - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) KW - Price Level KW - Deflation KW - Business Fluctuations KW - Cycles KW - Prices, Business Fluctuations, and Cycles: Forecasting and Simulation KW - Interest Rates: Determination, Term Structure, and Effects KW - Macroeconomics: Production KW - Agriculture: Aggregate Supply and Demand Analysis KW - Prices KW - Economic & financial crises & disasters KW - Economics of specific sectors KW - Banking KW - Economic theory & philosophy KW - Monetary economics KW - Output gap KW - Production KW - Central bank policy rate KW - Financial services KW - Demand elasticity KW - Economic theory KW - Interest rate floor KW - Monetary policy KW - Currency crises KW - Informal sector KW - Economics KW - Interest rates KW - Elasticity KW - Cuba UR - https://www.unicat.be/uniCat?func=search&query=sysid:134274669 AB - We propose a macroeconomic model with a nonlinear Phillips curve that has a flat slope when inflationary pressures are subdued and steepens when inflationary pressures are elevated. The nonlinear Phillips curve in our model arises due to a quasi-kinked demand schedule for goods produced by firms. Our model can jointly account for the modest decline in inflation during the Great Recession and the surge in inflation during the Post-Covid period. Because our model implies a stronger transmission of shocks when inflation is high, it generates conditional heteroskedasticity in inflation and inflation risk. Hence, our model can generate more sizeable inflation surges due to cost-push and demand shocks than a standard linearized model. Finally, our model implies that the central bank faces a more severe trade-off between inflation and output stabilization when inflation is high. ER -