determinants of domestic inflation ( pdf ), ” bis working papers 227 ( basel, switzerland : bank for international settlements, may ). for a more skeptical take, see jane ihrig, steven b. kamin, deborah lindner, and jaime marquez ( 2007 ), “ some simple tests of the globalization and inflation hypothesis ( pdf ), ” international finance discussion papers 891 ( washington : board of governors of the federal reserve system, april ). for background information on this model, see christopher erceg, luca guerrieri, and christopher gust ( 2006 ), “ sigma : a new open economy model for policy analysis ( pdf ), ” international finance discussion paper series 2005 – 835 ( washington : board of governors of the federal reserve system, january ). this model incorporates monetary policy responses to economic shocks and thus may show smaller effects on real gdp and inflation than other partial - equilibrium analyses. that said, the sigma model is just one of a number of models that the board staff regularly consults to inform their analysis of the u. s. economy. bis central bankers ’ speeches elsewhere. these prices likely have also been a factor in holding down inflation in the united states. the dynamics with which all these factors affect inflation depend crucially on the behavior of inflation expectations. one striking feature of the economic environment is that longer - term inflation expectations in the united states appear to have remained generally stable since the late 1990s ( chart 6 ). the source of that stability is open to debate, but the fact that the fed has kept inflation relatively low and stable for three decades must be an important part of the explanation. expectations that are not stable, but instead follow actual inflation up or down, would allow inflation to drift persistently. in the recent period, movements in inflation have tended to be transitory. for example, one might have expected the great recession to generate a downward wage - price spiral, but this did not occur. thus, the stability of inflation expectations has prevented inflation from falling further below our objective than occurred, and it has enabled the federal open market committee to look through some upward inflation shocks without compromising price stability. 5 we should however be cautious in our assessment that inflation expectations are remaining stable. one reason is that measures of inflation compensation in the market for treasury securities have moved down somewhat since last summer ( chart 7 ). but these movements can be hard to interpret, as at times they may reflect factors other than inflation expectations, such as changes

. in the model shown here, the appreciation has its largest effect on gross domestic product ( gdp ) growth in the second year after the shock. thus, it is plausible to think that the rise in the dollar over the past year would restrain growth of real gdp through 2016 and perhaps into 2017 as well. the rise in the dollar since last summer, of about 17 percent in nominal terms, with its associated declines in non - oil import prices, could plausibly be holding down core inflation quite noticeably this year. commodity prices other than oil are also of relevance for inflation in the united states. prices of metals and other industrial commodities, and agricultural products, are affected to a considerable extent by developments outside the united states, and the softness we ’ ve seen in these commodity prices, has in part reflected a slowing of demand from china and among the many papers finding a role for resource utilization in affecting inflation based on evidence from macroeconomic time - series data, see robert j. gordon ( 2013 ), “ the phillips curve is alive and well : inflation and the nairu during the slow recovery ( pdf ), ” nber working paper series 19390 ( cambridge, mass. : national bureau of economic research, august ) ; or douglas o. staiger, james h. stock and mark w. watson ( 1997 ), “ how precise are estimates of the natural rate of unemployment? ” in christina d. romer and david h. romer, eds., reducing inflation : motivation and strategy ( chicago : university of chicago press ), pp. 195 – 246. for similar results based on cross - sectional evidence, see michael t. kiley ( 2014 ), “ an evaluation of the inflationary pressure associated with short - and long - term unemployment ( pdf ), ” finance and economics discussion series 2014 – 28 ( washington : board of governors of the federal reserve system, march ) ; or, for wages instead of prices, christopher l. smith ( 2014 ), “ the effect of labor slack on wages : evidence from state - level relationships, ” feds notes ( washington : board of governors of the federal reserve system, june 2 ). there has also been debate regarding other potential channels through which global factors could affect domestic inflation – for example, whether measures of foreign resource utilization play an important independent role. for evidence supporting such global factors, see claudio borio and andrew filardo ( 2007 ), “ globalisation and inflation : new cross - country evidence on the global