INTRODUCTION

In most industrialized economies, inflation rates in the 1990s and 2000s were low compared to those of the 1970s and 1980s. Further underscoring these differences, inflation remained low even in countries-in particular, the United States-that experienced lengthy economic expansions. In fact, the inflation rate in the US continued to decline in the 1990s even as the unemployment rate fell below levels generally associated with rising inflation during the previous two decades.

Because of low inflation and because the relationship between inflation and economic activity in many countries during the past decade was contrary to the standard paradigm, economists have searched for ...

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