data for both the historical and projection periods. core inflation is the four−quarter percent change in the price index for personal consumption expenditures ( pce ) less food and energy. the shaded areas indicate periods when the slack is negative — that is, when labor markets are tight. projections are as in figure 2. source : congressional budget office ( the budget and economic outlook ) ; bureau of labor statistics ( retrieved from federal reserve bank of st. louis, fred ) ; bureau of economic analysis ( retrieved from federal reserve bank of st. louis, fred ) ; summary of economic projections, available on the board ’ s website at https : / / www. federalreserve. gov / monetarypolicy / fomccalendars. htm ; survey of professional forecasters ( retrieved from federal reserve bank of philadelphia real−time data center ). figure 4. simple phillips curve relation inflation ( t ) = – b slack ( t ) + c inflation ( t - 1 ) + other ( t ) where inflation = core inflation ; slack = unemployment minus the natural rate ; other = unspecified factors including a regression error and constant term ; t, t - 1 = years of the observations. figure 5. evolution of estimates of the slope and persistence parameters of the phillips curve slope of the phillips curve persistence of inflation annual annual 1. 2 1. 2 1. 0 1. 0 0. 8 0. 8 0. 6 0. 6 0. 4 0. 4 0. 2 0. 2 0. 0 0. 0 note : panels show estimates of coefficients b and c from the equation inflation ( t ) = - b slack ( t ) + c inflation ( t - 1 ) + other ( t ), where inflation is core inflation and slack is the unemployment gap, both as in figure 3. all data are annual, and each point is the estimate for a rolling 20−year sample ended at the date shown on the horizontal axis. shaded areas represent 70 percent confidence intervals. the data are through 2017. source : bureau of labor statistics ( retrieved from federal reserve bank of st. louis, fred ) ; bureau of economic analysis ( retrieved from federal reserve bank of st. louis, fred ) ; congressional budget office, the budget and economic outlook ( retrieved from federal reserve bank of st. louis, fred ) ; christopher erceg, james hebden, michael kiley, david lopez−salido, and robert tetlow ( 2018 ), " some implications

- neighbor ; in other words, they do not undermine exports from emes. in recent decades, some emes have successfully pursued an export - led growth strategy, and policymakers in those economies have sometimes expressed concern that their exports will be unduly restrained as accommodative policies in the advanced economies lead their currencies to appreciate. however, as shown in chart 4, although eme currencies bounced back from their lows during the global financial crisis – when global investors fled from assets they perceived to be risky – for many emes real exchange rates have moved sideways or have even declined over the past two years. some of this weakness may reflect the foreign exchange market intervention and capital controls that policymakers used to staunch the rise in their currencies. but even if advanced economy monetary policies were to put upward pressure on eme currencies, the consequent drag on their exports must be weighed against the positive effects of stronger demand in the advanced economies. according to simulations of the federal reserve board ’ s econometric models of the global economy, these two effects roughly offset each other, suggesting that accommodative monetary policies in the advanced economies have not reduced output and exports in the emes. 10 indeed, this view seems to be supported by recent experience, as the u. s. current account balance has remained fairly stable since the end of the global financial crisis. over the longer run, advanced economy policy actions that strengthen global growth and global trade will benefit the emes as well. a particularly important consideration regarding spillovers from accommodative monetary policies in the advanced economies is the extent to which such policies contribute to financial stability risks in the emes. because many emes have financial sectors that are relatively small, large capital inflows may foster asset price bubbles and a too - rapid expansion of credit. these are serious concerns, irrespective of the relative importance of monetary policies in the advanced economies in driving these flows. while the picture is a mixed one and some markets show signs of froth, indicators of financial stability do not seem to show widespread imbalances. 11 for example, eme equity prices, shown in chart 5, plunged during the global financial crisis, rebounded thereafter, but then generally flattened out or even declined. there are exceptions, of course, such as indonesia, whose stock market soared until earlier this year. but in aggregate, eme stock prices remain below their pre - crisis peak