The Phillip's Curve

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  • #17299
    derosa8
    Member

    If anyone could give a succinct explanation of this it would be much appreciated.

    1) What the Phillip’s Curve assert?
    2) What does it get right?
    3) What does it get wrong?

    #17300
    jmherbener
    Participant

    Here’s a conventional piece on the Phillip’s Curve:

    http://www.econlib.org/library/Enc/PhillipsCurve.html

    The Phillip’s Curve doesn’t get anything exactly right. Monetary inflation can generate lots of different combinations of price inflation and unemployment depending on the contingencies of the situation in which it occurs. Sometimes, like the boom of the 1960s, it generates both more price inflation and less unemployment. Other times, like the 1970s, it generates more price inflation and more unemployment. Clearly, there is nothing like a constant relationship between price inflation and unemployment. Even Fed economists are skeptical.

    http://www.federalreserve.gov/pubs/feds/2001/200130/200130pap.pdf

    #17301
    derosa8
    Member

    Thanks Professor Herbener!

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