The message of inflation is going up in part because of wage pressures and the big drive is driven by shock. So i would kind of do that after the regional whats interesting under further study is that the wage for the u. S. Seems to be working very well. Thats the point and even over time it hasnt flattened very much thats t what mathew made in a nice discussion. Maybe more to see. It might be the call date has changed and they are left out for the cpi or city basket. But in terms in waste space, it sends to be working well and it is left here. Yes, you have raised many important points with your question. I think one way of thinking about it. I think the points you alluded to, those are price changes that are very salient, important for daily life and easy to measure. Its that, if you think about an iphone, lets say you have a price of 999 for the last 15 years, even though an iphone today is a very different animal than an iphone like 50 years ago. So official statistics takes this into account and do a quality adjustment, which actually we now of course have a calculation of my personal inflation, which i would not take into account. So maybe we will talk a little bit later about some other things that interthis discussion you were raising. I think its definitely important that people tend to think about this big ticket things and daily life is important. But maybe other things that trend down. We will take a few more questions and if you can make them, please. Peter doyle. At one point a question on jake, t ja jamaica. That particular role in what happened j jamaica is uncontradicted. In the United States to what extent do you think the plausible explanation is the central bankers themselves do not believe in 2 . They take to themselves the judgment that it will be better for the United States and for others to be below 2. Thats what they deliver. Thank you. I would like to expand on a comment just made. Lower people see high rate innation because of this quality adjustment thing and this could be a large part of why socalled lower iq people see a higher have a higher expectation of inflation, pause theyre seeing higher inflation. And does it really make sense to measure inflation the way it is n now . I noticed in your philips curve regressions that especially professor silvana there was no control for a relative import price and i was wondering what the thinking was for there and then for both of you perhaps to comment whether import prices have a niche, play a role in the recent weakness in inflation . For example, in the data we noticed a distinction between core service and core goods inflation in the u. S. , both in pci and pc provide twoandahalf decades core goods inflation has been almost zero at the same time these are the components of inflation that have a higher import penetration and are not overly competitive . Yep. Taking that last one, obviously, cti important stationary is important. We control from pass cti inflation as a way to capture those pressure, but you could also add, mentions of import pricing inflation directly. You wouldnt change overflow, but i think that would be the right thing to do if you have enough you know powers to capture those. We do control in the final one for aggregate effect which should affect the whole country and admit to some extent, some of this might be up there. I want to mention the shooting on the fed just to say that one possibility is that, you know, the economy could or you know the modernized policy could be potentially more expansionary and it depends again on how much weight is put given the target or not. So, just there. Maybe just a quick remark on finland, so i go es from the perspective of the u. S. , we might actually call finland a socialist country, which means actually thats not a phone call nation between iq and income. The correlation is 0. 15. So i think thats a nice testing ground. Because it allows you to entangle disabilities from income, education, its free. Everyone can go to college so thats why im pretty confident that i can actually leave in that setting, disentangle the possibilities. Okay. On that, we thank our panelists. [ applause ]. Okay. We will move right into our second panel. Its all about technology and globalization and we are very pleased to have two rally wonderful presentations. We will talk about globalization and kristen is a professor of management and Global Economic response at mit and she was from 2014 to 2017 an external member of the bank of england. Our second presentation will be about technology and we have a presentation by alberta cabelo, who is a associate professor and founder of this billion prices project, which he will tell us more about. Okay. I have been asked to answer the question if its all about globalization. There is a lot of reasons why you might think it is, a lot of changes to the Global Economy would be affected to affect inflation including advanced economies. For example, take increased imports from low wage economies. That would be a one off production if inflation. Take increased trade more generally, increased trade integration would mean a higher indices are imported. Therefore, prices would be more related to changes in Global Demand and supply. Or take the fact that emerging market versus a greater effect in the Global Economy. So shifts in demanding emerging markets, drive shifts in commodity price, its driven Commodity Prices and oil prices over the last decade and that increased volatility and Energy Prices could feed into prices in advanced economy, especially if effects are nonlinear, which there are some effects of. Then there is whole literature arguing that increased Global Supply chains. The ease of shifting small parts of a production process to where it can be done most cheaply would affect pricing conditions and Exchange Rates in iraq with pricing decisions by companies and it could also reduce working Bargaining Power in countries because its much easier to shift small parts elsewhere, where it can be done more cheaply. Whether its one off effects or affects the whole inflation process or affects the philips curve relationship between domestic slaing in prices. If it does, there is pretty important things for Central Banks as janel et Yellen Janet Yellen mentioned. Heres a couple of papers from my comments, im going to draw on some research i have been working on for a couple of years that i presented right here at brookings a few weeks ago. But where is the literature is moving is that globalization is important. Some of what is going on with inflation dynamics does reflect globalization, its definitely not the whole story. Some of the other factors were going to talk about here today are also important. And the answer is also new. I initially hit that when i started working on this. Yes, globalization does seem increasingly important when understanding the dynamics of cpi inflation, headline inflation, globalization is increasingly important in understanding the cyclical short term ups and downs in inflation around the world. Globalization is less important a role in explaining some of the recent patterns if core inflation and Wage Inflation. Its not to say its not important. Globalization and Global Factors are still important. Moderately so for Wage Inflation. But the real change in their impact has been on cpn and headline infection. It affects the wage correlation. In the brookings paper i did on this, these results are supported by coming at these questions through some very approach itself, different inflation measures, different techniques, different countries. What i will do today is give you a couple of the key results, which also support the same story. So let me start with principle components. What i do here is i have inflation data for about 35 advanced economies around the world and i take out the shared principle component of these different inflation measures. Basically, how much inflation rates move together in thesed a vantsd commission around the world these advanced economies around the world. Its pretty correlated around the would, producer price, high components, not surprisingly they move together in different countries. The interesting patterns are the other lines. Cpi inflation now moves more tightly around the world than in the past. It could be driven more by Global Factors around the world. But wage in core infakes, the purpo inflation, the you wereple and blue line, it doesnt seem to be as billi as big a component as you see for increasing cpi inflation. There is a lot of things happen. These patterns dont tell you whats going on. Lets be dig a little deeper. Without a caveat, this is certainly problems with this framework. I wasnt sure what id find when i started. Actually when you do the philips curve for a Cross Section of countries, you find some strong pretty robust results. So what i will do is first estimate the standard work horse philips curve model that Central Banks, economists look at for large economies, such as the u. S. Estimate inflation is a fung of expectation and domestic stock. I will measure domestic stock using a broad measure not just unemployment. Then im going to do a simple augmentation of that model, where you control for import prices. Its a way to control the one variable for Everything Else going on in the world. Those are the sort of standard work horse models that work on domestic drivers of inflation. Thenally do an augmented model, several different ways globalization can affect inflation, changes in Energy Prices, changes in the Exchange Rates, changes in global slack, not just domestic slack and changes in the use of global value chains. Then i will do one more augmentation to that where it allows global valuables on shock inflation but also to affect this philips curve relationship between slack and inflation. So basically can a countrys explanation of imports flatten the philips curve. When i implement those models for cpi and inflation, i find the simple curve, the variables all come in significant. Pretty robust, expected times, higher expectation, higher live inflation, less domestic slack, all correlated with higher inflation in a Cross Section of countries. Sort of the cross sex of countries the correlation works well. Its generated with higher inflation. What gets more interesting is when you control for the global variables. Those also all come in significant with the expected signs. So higher oil prices, higher commodity price, x energy, Exchange Rate depreciations, less world slack and less use of global value chains is also all significantly correlated with higher inflation. So that suggests these global variables matter, at least in explaining cpi inflation. And in one more variance, when i also allow for exposure to trade or imports to affect a flattening of the philips curve, which also comes through in this. This explains this is significant also and it looks like its quite important. So to give you some concrete example. If you look at the philips curve over the last decade relative to before the crisis, the philips curve is flattened as weve seen in a lot of other work, but import exposure explains over half of the flattening of the philips curve. So that shows globalizations not only direct affect but the philips curve relationship with slack. So those are the effects of cpi inflation so we all know what in economics there is something significant, it still may not be that important in magnitude. So to get a sense of how important, including these global variables are to understand inflation, i also ran these models with rolling regressions and calculated the errors. What if you estimate just a domestic model explaining inflation or add these global variables, how much does that include our ability to understand infloridaition . What you want is smaller errors. So the lower these numbers, this better the model works. What this shows is the black lines is when you, the errors when you estimate the models with just domestic variables. The red is when you include the global variables. It shows including global variables does meaningful reduce the errors. It reduces the errors of this simple model estimated cpi inflation of just over 12 on average. Particular errors around the Global Financial crisis, incorporateing whats going on in the rest of the world to understand cpi inflation. Also very important from this window from 2012 to 2015, world slack very plays a role in Commodity Prices in explaining why inflation models didnt do so well. If you add the global variables and the inflation models, you can reduce the errors and reduce the fitpy 12 . Not the whole information. The models are far from perfect. There are other things going on, but it does make a difference. If you go back and do the same anal sills for core inflation or Wage Inflation. You find the bake model still largely works. Domestic variables are important in explaining inflation. Global variables, sometimes important. Exchange rates often important in explaining core inflation. Left robust. Magnitudes are smaller, in much less importance in explaining Wage Inflation. Also i get some flattening of the philips curve when you estimate this for cornflation. Not as much and the flattening es is less related to increased exposure for core and wage inflati inflation. If you estimate the model and see how much these global errors reduce errors in models for core inflation and Wage Inflation on the right. You find it inflates it a little bit. Not as much as when you estimate cpi and global variables meaningfully reduce errors in models of cpi inflation moderately raise core inflation. It steps to add them. You are not going to explain any apparent puzzles over the last decade. So i could stop there. And when i presented this paper here a few weeks ago, thats largely where i stopped, then ben bern anke asked me a good question, which ones, by how much . Do they really matter that much for the u. S. Makally . So i have an answer for your question now sho you wont ask me in five minutes so what i did is i took these models and i estimated used the estimated coefficient itself, plucked in the actual variables for the u. S. And then estimated how big an impact these global variables had on cpi inflation for the u. S. And this is what you find. Lets start with some of the puzzles we have been talking about today so during the period sort of immediately during and after the Global Financial crisis, u. S. Inflation was higher than many people had expected. What drove up u. S. Inflation during that period . You see at least from keir sa 2010 on from circa 2010 on, oil prices and Commodity Prices were important if december 2009, 2010, 2011 in boosting up inflakes during that period. Global value chains by contracting were dragging down on inflation as much as before. So thats a part of the explanation for why inflation was a bit stronger during the crisis. Where i think the biggest results come in is the period sort of after the crisis, this 2010, 2015 window. When inflation was slower to recover in the u. S. Than some of our models predicted. So how much of that was global variables . So what this suggests the dollar Exchange Rate on the top left, that dragged down inflation a bill lit. We have. 1,. 15,. 2. Prices also were a temporary drag. I think the most interesting what hasnt received as much attention is the bottom left. Global value chains as they picked up, they picked up more quickly, 2010, 2011, 2012, as emerging markets recovered more quickly, that acted as an important drag on inflation and global slack also acted as a drag on inflation. Each of those effects by themselves are pretty small. You are talking your. 1s,. 2s. If you add them all up, that starts to add up n. Comparison, the draing from og from domestih as the drag on domestic slag faded you had some pretty meaningful drags from global value chains and from global slack. So thats what can explain some of the puzzle, again not the whole story. The obvious question is whats that mean for now . My sample ends at the start of 2018. What it suggests is at least from 2018 forward by these drags that were holding down inflation and presenting this puzzle arent as potent anymore. Exchange rates effects are minimal. I will not try to predict what will happen to oil and Commodity Prices there. At least world slack, which has been drag on inflation in a meaningful way isnt dragging as much and global value chains, especially as trade tensions are flaring up, that could be an important factor no longer keeping inflation down. Which hasnt been fully incorporated in most of our standard models. So to tie up, i also have a whole set of results using a different approach to modeling, breaking inflation into a trend in cycle. You get very similar results to what i showed you today, which increases my confidence in this set of results. But to summarize, where they all point is globalization is increasingly important to understanding cpi inflation in the cyclical shortterm movements in inflation. Wage and core underlying inflation that were still a largely domestic process. Global matters a bit. It helps the models a bit. It is not the big explanation for puzzles out there, in terms of import exposure is important. It explains a flattening of the philips cub for cpi inflation. The other effects vary based on what period you look at or the time window is. The global variables seem to be important as a whole. But theyre a specific importance in any window depends on what variables and windows you are looking at. Thank you. [ applause ]. Great, thank you. Thank you for the organizers for making me here. So i talk to increasing and interesting is the word at the end and i decided to put i noted if you put amazon on title of a paper a lot of people pay attention. But you can more generally think of this as online competition here about technology, online competition, something happening in the market thats affecting pricing. And as you probably remember, the story of the Amazon Effect became quite interesting particularly around the time where we were seeing low inflation two years ago that seemed quite puzzling and the argument was that amazon is somehow putting pressure on the margins so some spectators and constraining their ability to increase prices even in the face of rising demand and gradually there has been increasing interest in the topic of online competition. I personally, i should have mentioned this. I want to work with online prices, because about ten years ago, we decided to start collecting a massive amount of data from retailers that sell online in harvard, in a sense our data set should be exactly what you need to detect if online competition with amazon is really affecting the behavior of Large Companies that are in the middle of these offline and online worlds. So i decided to tackle this question. There are others, i should mention, that have that related research, they have worked a lot on the characteristics of online only type of pricing. And he has at amazon the flexibility in prices online. And we have other papers focused more on the measurement side and what this internet pricing does, thats the paper. I tried to tackle this more is there an amazon in our fate and what is the important Amazon Effect that we should be focusing on in terms of inflation dynamics and just to give you a preview of my answer. The story about the shrinking margin i think may be relevant. The truth is i cannot observe those margins. These companies will not give us that information. But you can think of this essentially as if it is putting some pressure, it is a temporary measure. There is so much that mar jens can actually fall and eventually when those margins are very small, you would have to see some reaction, quite Quick Reaction to some of these. I think if you want to take out something, our technology or online competition is affecting amazon, its hard to focus on the pricing behaviors of these companies have changed over the years. See we have ten years of data. We can follow that over time. There is one thing we have detected or i should say two trends we have detected that is particularly relevant in terms of Monetary Policy. One is adjustment has increased dramatically. In part, i think this is because of a pricing algorithms and the ability also to monitor what the others are doing and mimic their behavior. The second one is uniformity request. Many retailers have a single price. Many expect they will get the goods quickly in a matter of days for free, in theory, in terms of shipping and there shouldnt be any difference in how the prices that they observe, theyre in boston or San Francisco and that is sort of making these Companies Price identical all over the u. S. So you put those two things together, what does that mean for inflation . I argue new this paper that its basically making these prices more reactive, more sensitive to i call them aggregate shocks. You can think this is less about the local type of sin kratic levels for example and more on whats happening on a national label. Which can be related to decreasing sort of the domestic type of national or you can think of it as a noble shock. I will show you in particular to argue some of the slow down that we had in 201718 was actually related to the cost of type of shocks in gas price and but that has actually changed recently in their monetary inflation now. So let me walk you through the results and document these facts. First, there is a tremendous amount about rhythmic pricing in theory. Again, companies are not straight forward about how this is happening. But since 201314, we have been hearing stories of these Companies Using algorithms to make pricing decisions. It makes sense, we are labeling our algorithms with our cars, why wouldnt we allow them to make our pricing decision, certainly they have amount of da that it doesnt matter all the companies doing it. Many of these companies are monitoring each other constantly. The cost of doing that has increased dramatically. If there is someone using these algorithms. Others use the same behavior, you get the pricing patterns affecting everyone more or less the same. What i am showing you here is basically how the rage, you think how long prices tend to stay constant. It has shifted dramatically across all goods where you would expect online competition to have increased, particularly in recent years. You can see, for example, furnishing and Household Goods falling from about 14 months to just six months in our data. I am keeping constant sectors. The retailers so we know its not about the composition. In amazon you can see its relatively stable. That may change the next few years. So its a tremendous amount of flexibility. The second point that has increased over time. In the paper i also tried to link it specifically to goods that compete more with amazon and you go search for those goods have particularly more flexibility. The second thing has to do with this uniformity of pricing which is a little puzzling. If theyre using algorithms to change our prices over time, where are they not using them to give us very different prices at the same time. And here the thing gets complicated, its not a logical constraint that they face, i believe they that is the fact that online pricing has also made it tremendously transparent. You can see prices in different location and people have concerns if they see theyre getting charged a different price for exactly the same good in a different location. We have, there is this fairness concern, they will tell you, we are very worried about using these algorithms to customize prices because we will break the trust of our consumers. This is an old story, by the way, amazon faced some criticism in 2002 for allegedly trying to price discriminate and sell cds at different prices from these people at the same time. They promise never to engage in pricing based on demographics again at that time. So, psychologically, they can, but in terms of transparency and fairness concerns, we are seeing the opposite, there is this uniformity. We see a sample. We collected data offline for 102 zip codes, 10,000 codes. We dot them roughly at the same time. What you can see is that the share of identical prices across zip codes for singles is nearly perfect. Its higher in amazon, very much for retailers. Things are not that far behind so why does this matter . You put the two things together. As i mentioned in the beginning, high flexibility and the sort of National Pricing policies, you would expect the prices to be reacting more to this sort of National Cost shocks. Thats what im showing you here. In fact, you can take gas prices in exchange, two simple shocks we can monitor, you see that is if direct competition with amazon, particularly here, im taking walmarts prices, they tend to change prices more often. They tend to be more uniformly priced and by the way, they tend to have a higher pass through rate for gas price, for Exchange Rates as well. And the paper sort of shows the sensitivity is increased in our example during time as well. Why, you may think at this point, this is exactly the opposite of what we expect is to explain, theyre adjusting faster to these shocks. Why are we seeing something . I think this is sort of pointing in the direction of what are the shocks that we have experienced in the last few years. And in that sense, what i did here is try to show you how first with online prices, in particular, you can actually find that the volatility of the movements in gas price and exchanges explain a lot of the core prices that we can compute so while you are looking at focus on the orange line for a second, thats like an online core, but we compute it with the online data we get from these retailers that are arguably for more exposed to the amazon competition you would get that has these retailers and others. When i circle basically this time period where it was possible greatness, if you look at it in the timing, basically the generous 2017, the inflation rate in online prices was falling is a time then gas prices was falling and the dollar was appreciated. It started to turn exactly at the point when gas prices rose in 2017 and the dollar started to deappreciatiate and deappreciatated roughly one year. Since then you think of these two forces sort of balancing each other. Have you an appreciation of the dollar, relatively high gas prices. But the ups and downs you see on this orange line are quite closely comoving with gas price. The cpi sort of shows you the same message, its only shifted. It has a lag, which complicates the identification of this type of effects of these cost shelves. So just to finalize because im out of time, my view is even core surprises due to technology, its changes in pricing behaviors is becoming less insulated from these shocks. So my parth is we should sort of my argument is we should sort of be paying both ways. It can be inflationary. If some of the stocks peck up, we should be able to see more inflation in the forefront. If the focus is going to be understanding these shock, we need to think nor careful about what drives and affects these pricing algorithms, and how the shocks are perceived by commerce. I am doing research on the trade war. When i started doing this i expected it to be quite high. What we noticed at the retail level there is some limitation because of the way many retailers perceive how temporary this shop was going to be or how easy it was going to be for them to wait a little longer before implementing those shocks. So, if any case, and i have a last point, but im way out of time some thank you very much. Im happy to talk about that later. Thanks. [ applause ] thank you both for a really fascinating and perfectly clear presentations. I want to start with a clarification question from you, not clarification, kind of an interpretation. So, your find secretary basically that globalization is sort of important for explaining headline cpi and even flattening of the philips curve, which is really interesting but not for core and not for wages. So one of the mechanisms i thought where it might flatten would be there is no, you cant ask for wage increases because you got foreign competition or what is the economic story that explains that distinction . I know you dont know it from the data, but what do you think . So, let me clarify. So i still find some role for the global variableles for core Wage Inflation. For example, when you put them in the models they reduce errors 3 to 8 . Wlant the flwhat object thew the flattening . 10 of the flattening. So its there, but its not nearly as strong as the cpi. So i think there is a puzzle there. I think some of it could just be we have had these huge summit movements and Commodity Prices and oil prices, which are seen as short term. So Central Banks may not respond to those because Inflation Expectations are well anchored. So you dont get the reactions there. I think there is also something going on which came up in the first panel where there is this puzzle where there has been, the wage philips curve is working pretty well. You dont see the flattening in that. You havent seen the same effects of globalization. Wages are going up in some countries, prices are not. That does suggest something silvana said, productivity growth may be increasing more than we know. Or firms are reducing their margins. Thats something they could do for a period. There was some excess profits in there that could be shrinking. That cant go on forever. If thats a part of the story, we might see some effects come through later on. It may be a temporary effect. That brings us to, if, whats up with inflation . So how much do globalization and technology explain it . And to the extent they do explain it, you know, is this because things have been happening that has massed this underlined philips curve as in the first panel or because they fundamentally change the structure of the inflation process and of the relationship between gaps and inflation . And i want to get both your views on that . Why dont we start with technology . Sure, i think it is masking the relationship and its basically because i believe i do notice prices are quite reactive to some of the shocks. Its a matter of identifying what those shocks are really are. We may placing too much emphasis on the very short run, of what is happening with the u. S. , which is understandable. But i think we need to acknowledge that if we carefully try to understand the same things the characteristics that each shop generates at the retail level, we are likely to understand better some of the recently placed so im more in the compost of seeing this as a relationship that is there, its that we are not considering the right types of shops we see. And the story that would say that miami dont have pricing power, so they cant react. So now its so easy to price compare. Is that not so maybe would change the slope . I think thats a concern, particularly in the short run. But then you can think how low can a margins fall and how sustainable it is with what christine is saying. So i did briefly look at the effects of the trade war. And while we do find that you can think of this additional shock being eventually passed on to consumers, but some stages where in the days actually they can stop it and one would be if expormted from china were to drop their prices, we do not find that, we find importers today are paying a significant cost of the tariffs. Then that doesnt necessarily assume we should observe a very quick pass through at the consumer level. It depends on how these retailers are internalizing that cost and how long they think they can sustain their reaction in margins. The areas we have currently suggest that they are reducing some of these margins. I question how long it can be maintained. I think as soon as those margins are low enough or they can become convinced the shock is paramount enough, 23 will see a very quick pass through in consumer price. And if i ask you to explain the problem we start with, during great inflation now, how much does the amazon type effect can explain it. Not just the particular years, is that an important part . Not an important part . Do you have a sense . Well, i think, the analysis was a far more long term type of analysis. I am mostly focused on the last four or five years. Can i tell from you that perspective in knowing that some of these pricing competition is actually making prices quite reactive to these shocks, i think, i can only explain or argue that there is not much of a pass through going on with inflation when you take that into account. Now, usually i suspect we tend to have this impression that the pass through rates from some of the shocks into Retail Prices is relatively low, so we just remove them and we focus on core. We shouldnt be looking so closely at them. The point im make secretary i think we should increasingly be more focused and making the connection to Commodity Prices and other sort of type of cost shocks. Yes. Before i answer, i want to comment. I think two results, there is a nice complimentary where one part of my analysis, you find these bigger movements in Commodity Prices over the last decade, so that is a direct effect on cpi inflames. You see it in your results. What i find is the sensitivity of Commodity Prices increased. Which also fits with your story. And it might how i justified that before seeing your paper was that there could be a nice book by hamilton and others show larger movements in oil prices lead to Larger Companies and many cost price models, in shocks you price it faster. Again it also then would be accelerated by the effects you are getting. So its a nice link between the papers. Back here to your initial question of so does globalization mean just one alpha effect in the level of inflation or the inflation process. What i find for cpi inflation is both. The global variables have had big one off effects, shortterm effects on the level of inflation. Some could continue with global chains, et cetera. It seems to have affected the process what slack is doing to cpi inflation. Core inflation, you still get some direct level effects, especially Commodity Prices, global slack has had some more role. A smaller effect on the philips curve and Wage Inflation smaller still on the direct level effects as well as the channels do slack. So we sort of talked about how much we can explain of whats happening with inflation. Now, going forward, like advice per Monetary Policy in the central bank, how does thinking of including these effects matter . These price changes, does that mean they should be focusing on a different measure of inflation . Inflation will be moving around a bit more . Is there implication of this structural change in the economy and local vision . So in terms of what to look at, i think for my reasons, its important to incorporate the same Exchange Rate and the gas prices, you can think of relating it to in terms of Inflation Expectations. Thats also why the fed may want to pay more attention to headline, but i also wanted to make the argument that a measurement can all actually be changing because of this. We have a statistical methodologies that are based on a very different type of environment and as you can think of the frequency price increasing, but particularly also the rotation of products changing, we should be thinking about whether were mixing well some of these inflation statistics. Its something thats often i think overlooked. We tend to think inflation is better measured than other statistics. But you can expect it to be playing a role as well. So i think my answer to that is straight forward. I would like to see, especially in academics, there is a tendency for academics to adjust the philips curve. Domestic slack, inflation and you are done. Maybe oil prices. So i would like to see at least academics doing these simpler models, include more terms to incorporate whats going on in the rest of the world. It can matter. Central banks do more complicated sg models do some. Theres probably ways they can evolve that and put more weight on it. What ive done from other work ive done suggests the global variables vary over time. You sometimes have them nonlinear, grow at certain periods, and you have to have that flexibility built in. All right. So im going to open it up to the audience for questions. So say gen we will take like three questions at a time. Raise your hand, the mic will come for you. State your name and where you are from. Any questions . Way in the back there. Hi, mike ral spx capital. I hear kind of conflicting stories, sometimes you hear we have increasingly comfortable Monopolistic Companies who dont have much competition. Other times you hear that amazon and other forces are really pushing their margins and forcing them to pass through prices quickly. And then with globalization, you know even before trump there was a lot of pandering about kind of the slackening of globalization that the hyperglobalization era had already ended. If you look at like import intermediate goods, you know that really flattened out already before kind of the financial crisis period. So how do you kind of square these competing stories that you see from a lot of economists on what that means for inflation . David beck sorry. David beckworth. And this is maybe more for kristen, but on the globalization front, you know, i know were thinking ability the u. S. Here, the low inflation in the u. S. , but if you look around the world in all these advanced economies, japan, europe, we have a struggle. Its also where we see low interest rates, jackson hole you had an incredible graphic that showed the real rate of the commission going down and emerging marks was high and robust. Were also the parts of the world that provide the safe assets. So im wonder figure there is a safe asset story here, the demand for safe assets, a demand for commission, a global liquidity shock that feeds into dual inflation and advanced economies . I can take those two. Okay. No, go ed. Let me start with the first when we return so different storiesincreased . Decreased . Global supply chains . When i started on this, i thought Global Supply chains, its an easy concept. Its hard to measure what you mean by that. Its not increased, increased trade seems to core light with gdp growth. It flushes out how Global Supply chains are increasing. I found measures how much trade there is in intermediate goods, how much is complex in terms of crossing borders, multiple times, not just one time so the measure i used in this paper is a principle component of a number of components i get together at least in my head i think as a Global Supply chain. What you se a pattern, be every the Global Finance crisis, it came back pretty quickly and now are at high levels, stayed pretty high and have started to decline recently. I dont have data for the last year. My guess is i would have declined the last year so thats how you can get some different effects of these Global Supply chains over time contributed to higher inflation right after the crisis is is this mode of producing things more cheaply collapsed. Then it came back faster than growth in advanced commission and contributed to lower inflation 2012 to 2016, 2017. And now we are hitting a diminishing impact forward. Thats the time series. Then a question about safe asset story, lower interest rate. I think thats all interrelated to some of this what other key points i tried to politely make and hold a discussion you referred to, though, i think we put far too much intimts on the neutral interest rates. The margins of error are massive depending how you estimate them. I think the concept makes sense, but were really wrining our hands. Wringing our hands. When you do get some of these shocks, do you get a movement in and out of certain currencies, which have a safe asset. That does drive exchange effects. Whiff does seem to be more important than many people take into account. Especially as trades a hin creased, Global Supply chains, these movements can have beg effects on pricing. In the u. S. People tend to say it doesnt matter much. It doesnt matter much i suggest it is there, it does help on the margin explain some of these puzzles when inflation has been a little higher, a little lower. So id like to see attention through that channel, maybe less focus on it exactly estimating this neutral large start. And i completely agree with that last statement. Maybe because im from argentina, everything i see with prices from my mind has been the Exchange Rate. But i totally the think my results are suggesting there is more than we typically assume. I want to say something, you say it is true, there is something completing the sores about the margins, for example, amazon shrinking margins or someone will have huge margins in their pricing. Thats why i was trying to distinguish between the more traditional Amazon Effect, which is the shrinking margin story. I think thats a shortterm story, 20 years ago, people were talking about walmart and they were creating a walmart effect. It can be useful to explain the shortterm deviations. I see it as a temporary effect. Now in terms of how amazon, the competition is changing the way pricing decisions are made. I think thats important with the we are in a more inflationary environment or some of this costs start to pick up. Thats why i believe we should focus emphasis on the impact of technology and its implications from that. I would like you to comment. Amazon is not just a monopoly, maybe those are the margins that are shrinking and can you explain that. Yeah, carl pulzer, center on capital and social equity. If we had this conversation when the phillips curve was originated and the Monetary System was dwoeveloped, there would be talk about labor and its Bargaining Power. We really dont see that anymore. Now you see if you go to mcdonalds and talk to people about should you get a minimum wage increase thats significant, they say then our hamburgers will cost more. So are we saying in other words, the flatness of the curve, is a lot of it because labor is now more of an independent variable . Or more of a dependent variable and not independent actor . Is that a question, i guess . So just to answer what was asked, its very consistent with the paper. There are other papers that have documented that at the border theres full passthrough. Its not the case chinese exporters have lower prices so the burden is on the u. S. Theres a question about whether that is being passed on to consumers and thats what our papers do. We finding the same at the border but relatively lengthy passthrough, thats why i was trying to make an emphasis that we have to think about thein se incentives it generates. Very quickly we observe it at the Consumer Retail level. I think there are a lot of very interesting things going on. When i was in the working at the bank of england and talked to companies around the uk, i was amazed how Many Companies say we cant find enough workers, we cant keep workers. Id say just pay them more. And theyd say, no, we cant because then our prices would be too high and we cant compete. Some of it is globalization, increased competition with goods from other countries but a lot of interesting things going on domestically. More workers are selfemployed or part of the sharing economy, working for an uber, working parttime. In the analysis i did, i was very careful not to just look at the unemployment rate. I also brought in things like hours worked relative to normal hours. Share of workers who were selfemployed, share of workers who were parttime, people who have dropped out of the labor force, things like that. I found in my results having that broader measure actually significantly improved the fit of the phillips curve so those other things are very important. The reason i didnt talk about that much is we have the next panel on this and theyre going to focus on that. Hopefully that will also get at your questions in much more detail. All right, were out of time. Please join me in thanking this very interesting panel. Oh, and we have a tenminute break. We have a short break right now. Sorry. Our conversation from the Brookings Institution on Monetary Policy and inflation continues. Coming up, well hear from a former Economic Advisor to Vice President joe biden, jared bernstein