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We are pleased to invite you to a guest lecture on Chapter 2 of the World Economic Outlook, presented by the IMF at CERGE-EI, room 7.

Thomas Kroen: The Great Tightening: Insights from the Recent Inflation Episode

The recent global inflationary experience was characterized by large sectoral demand shifts amid supply disruptions and unprecedented fiscal and monetary stimulus. Chapter 2 shows that the pass-through of sectoral price pressures to core inflation, and the shifting and steepening of the Phillips curve are essential to understanding the global inflation surge. This is consistent with key sectors hitting their supply bottlenecks as demand rotated across sectors and was boosted by a drawdown of savings. The chapter offers a new monetary policy lesson and confirms an old one. In extreme cases with widespread sectoral supply bottlenecks and strong demand, inflation can surge, but tighter policy can bring it down quickly with limited output costs. Outside of such cases, when supply bottlenecks are confined to specific sectors, conventional policy rules perform well.