Inflation during times of economic slack and deleveraging : a panel data analysis

Historically, persistent and pronounced economic downturns gave rise to notable falls in the level of inflation but these falls are not observed in the immediate aftermath of the global financial crisis of 2008–2009. This paper analyses inflation dynamics in a cross-country Phillips curve framework while considering credit evolutions and periods of financial stress and documents a flattening of the Phillips curve during economic slack.Historically, persistent and pronounced economic downturns gave rise to notable falls in the level of inflation but these falls are not observed in the immediate aftermath of the global financial crisis of 2008–2009. This paper analyses inflation dynamics in a cross-country Phillips curve framework while considering credit evolutions and periods of financial stress and documents a flattening of the Phillips curve during economic slack.A