The Phillips Curve: Back to the '60s?

This paper reexamines the behavior of inflation and unemployment and reaches four conclusions: 1) The U.S. Phillips curve is alive and well (at least as well as in the past). 2) Inflation expectations however have become steadily more anchored. 3) The slope of the curve has substantially declined. B...

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Bibliographic Details
Published in:The American economic review 2016-05, Vol.106 (5), p.31-34
Main Author: Blanchard, Olivier
Format: Article
Language:English
Subjects:
Analysis
Economic conditions
Economic theory
Evolution
Inflation
Monetary policy
Phillips curve
Standard deviation
Studies
THE UNITED STATES ECONOMY: WHERE TO FROM HERE
Unemployment
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Summary:This paper reexamines the behavior of inflation and unemployment and reaches four conclusions: 1) The U.S. Phillips curve is alive and well (at least as well as in the past). 2) Inflation expectations however have become steadily more anchored. 3) The slope of the curve has substantially declined. But the decline dates back to the 1980s rather than to the crisis. 4) The standard error of the residual in the relation is large, especially in comparison to the low level of inflation. Each of the four conclusions presents challenges for the conduct of monetary policy.
ISSN:0002-8282
1944-7981
DOI:10.1257/aer.p20161003