14 Facts About Phillips curve

Phillips curve is an economic model, named after William Phillips hypothesizing a correlation between reduction in unemployment and increased rates of wage rises within an economy.

In 1967 and 1968, Friedman and Phelps asserted that the Phillips curve was only applicable in the short-run and that, in the long-run, inflationary policies would not decrease unemployment.

Nonetheless, the Phillips curve remains the primary framework for understanding and forecasting inflation used in central banks.

Economist James Forder argues that this view is historically false and that neither economists nor governments took that view and that the 'Phillips curve myth' was an invention of the 1970s.

Theories based on the Phillips curve suggested that this could not happen, and the curve came under a concerted attack from a group of economists headed by Milton Friedman.

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An equation like the expectations-augmented Phillips curve appears in many recent New Keynesian dynamic stochastic general equilibrium models.

Two influential papers that incorporate a New Keynesian Phillips curve are Clarida, Gali, and Gertler, and Blanchard and Gali .

Original Phillips curve literature was not based on the unaided application of economic theory.

Traditional Phillips curve story starts with a wage Phillips Curve, of the sort described by Phillips himself.

New Keynesian Phillips curve was originally derived by Roberts in 1995, and since been used in most state-of-the-art New Keynesian DSGE models like the one of Clarida, Gali, and Gertler .

The short-term Phillips Curve looked like a normal Phillips Curve but shifted in the long run as expectations changed.

However, according to the NAIRU, exploiting this short-run trade-off will raise inflation expectations, shifting the short-run curve rightward to the "new short-run Phillips curve" and moving the point of equilibrium from B to C Thus the reduction in unemployment below the "Natural Rate" will be temporary, and lead only to higher inflation in the long run.

Phillips curve started as an empirical observation in search of a theoretical explanation.

Specifically, the Phillips curve tried to determine whether the inflation-unemployment link was causal or simply correlational.