Saturday , May 21 2022
Home / EconoSpeak / Is The Downward Sloping Phillips Curve Back?

Is The Downward Sloping Phillips Curve Back?

Summary:
Maybe. We have gotten so used to the idea that to the extent it is even meaningful it is flat at inflation rate of 2%, nobody talks about the old textbook Phillips Curve that slopes down.  But there is some evidence that out of all these pandemic upheavals it may be back, at least for awhile. If this is the case then indeed there may be a tradeoff, and the higher inflation the US is experiencing may be due partly to strong fiscal and monetary stimulus, with that also bringing about higher growth and lower unemployment, the latter somehow not getting noticed by much of the media in all the moaning and wailing about inflation.A possible simple measure of all this might be to compare the US and the EU. So as of the first Economist of the year, the US had an inflation rate of 6.8% last year

Topics:
Barkley Rosser considers the following as important:

This could be interesting, too:

Mike Norman writes Links — 19 May 2022 Part 1

Mike Norman writes TIPS Valuation Commentary — Brian Romanchuk

Peter Radford writes Thinking like an Economist?

Mike Norman writes Links — 18 May 2022 Part 2

 Maybe. We have gotten so used to the idea that to the extent it is even meaningful it is flat at inflation rate of 2%, nobody talks about the old textbook Phillips Curve that slopes down.  But there is some evidence that out of all these pandemic upheavals it may be back, at least for awhile. If this is the case then indeed there may be a tradeoff, and the higher inflation the US is experiencing may be due partly to strong fiscal and monetary stimulus, with that also bringing about higher growth and lower unemployment, the latter somehow not getting noticed by much of the media in all the moaning and wailing about inflation.

A possible simple measure of all this might be to compare the US and the EU. So as of the first Economist of the year, the US had an inflation rate of 6.8% last year while the EU had one of 4.9%. The US had a GDP growth rate of 4.3% while the EU was at 3.3%. And on unemploiyment, the US had a 4.2% rate versus EU at 7.3%.

The most recent annual numbers for the US seem to push this even more, with inflation at 7.0% and the unemployment rate down further to 3.9%. I do recognize that the advantage of US on unemployment is exaggerated in that many European nations have done better on labor force participation than has the US.

I also note that part of the higher inflation we are seeing does reflect global supply chain problems associated with the pandemic. The EU rate of inflation, higher than in the past, is a good sign of that. So maybe whatever higher inflation we see in the US is due to US policies might be that extra 2% the US has.

Barkley Rosser

Barkley Rosser
I remember how loud it was. I was a young Economics undergraduate, and most professors didn’t really slam points home the way Dr. Rosser did. He would bang on the table and throw things around the classroom. Not for the faint of heart, but he definitely kept my attention and made me smile. It is hard to not smile around J. Barkley Rosser, especially when he gets going on economic theory. The passion comes through and encourages you to come along with it in a truly contagious way. After meeting him, it is as if you can just tell that anybody who knows that much and has that much to say deserves your attention.

Leave a Reply

Your email address will not be published. Required fields are marked *