These results give numerical form to what we see in the right-hand panel of figure 3, covering the recent period: Large and persistent moves in the unemployment gap were associated with, at most, modest transitory moves in inflation. What Led to the Changes in the Phillips curve?
These developments amount to a better world for households and businesses, which no longer experience or even fear the scourge of high and volatile inflation. To provide a sound basis for monetary policy, it is important to understand what happened and why, so we can avoid a return to the bad old days of the 1970s.