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Tag Archives: Phillips Curve

Is The Downward Sloping Phillips Curve Back?

Is The Downward Sloping Phillips Curve Back?  Maybe. We have gotten so used to the idea that to the extent it is even meaningful it is flat at an 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 a while. If this is the case then indeed there may be a tradeoff, and the higher inflation the US is experiencing...

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On the irrelevance of inflation expectations: the return of the working class

There are many myths about the Phillips Curve and the so-called Monetarist Counter-Revolution of the 1960s and 1970s. Forder's book is a good read on some of these issues. Jeremy Rudd's recent paper is also a must read, and has now been accepted for publication in the Review of Keynesian Economics (ROKE).It debunks the myth about the importance of inflationary expectations for explaining the Great Inflation of the 1970s, and casts doubts about the Monetarist Counter Revolution, the Rational...

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Is There Really A Trade-Off Between Inflation And Unemployment? — Brian Romanchuk

Rather than attempt to explain what the mainly neoclassical economists are going on about, I want to step back and try to translate their debate into terms that would be understood by people who do not share the same assumptions. I am pretty sure that post-Keynesian economists have a lot to say about the topic as well, but once again, they tend to be discussing wonkish points that would elude an outsider.…I have an engineering background, and engineering is largely the science of...

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Is There a Relationship between Inflation and Unemployment? — Menzie Chinn

While the equation fits relatively well, clearly it’s not perfect. As of 2019Q2 (first two months), year-on-year PCE inflation is underpredicted by 40 bps. I estimated the equation on a restricted sample ending in 2014; this imparts only a marginal difference — so it’s not that something has changed substantially over the last 4 and a half years. Rather the specification could be improved. In other words, perhaps a different measure of NAIRU, or a nonlinearity might improve the fit....

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Trump’s top economic adviser praises Alexandria Ocasio-Cortez, wants to meet with her on Fed … — Bloomberg

President Donald Trump’s top economic adviser praised left-wing Democrat Alexandria Ocasio-Cortez, after the political rivals found common ground in urging the Federal Reserve not to worry about low unemployment triggering inflation. “I’ve got to give her high marks for that,” Larry Kudlow told Fox News on Thursday, referring to Ocasio-Cortez’s quizzing of Federal Reserve Chair Jerome Powell in Congress the previous day.... At least they agree that the Phillips Curve is wrong.Financial...

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Mish Shedlock — Yet Another Fed Study Concludes Phillip’s Curve is Nonsense

The Phillips Curve, an economic model developed by A. W. Phillips purports that inflation and unemployment have a stable and inverse relationship.  This has been a fundamental guiding economic theory used by the Fed for decades to set interest rates. Various studies have proven the theory is bogus, yet proponents keep believing.… Without the Phillips Curve, the current approach to monetary policy is groundless other than "discretionary." There is no rule.And it's not just the Phillips...

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David P. Goldman — There ain’t-a no Phillipsy Curve, once again

If we get inflation, it could be minus wage pressure across the board but only in places were the labor supply is short. Ordinary workers may not see much relief in the expansion, replicating their situation in the long and slow recovery period, owing to structural shifts in the economy — downsizing, offshoring, automation and robotics, etc.Asia TimesThere ain’t-a no Phillipsy Curve, once again David P. Goldman

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The Economist and the natural rate of unemployment

The Economist new series on 'big ideas' tackled in a recent issue the concept of the natural rate unemployment (subscription required; other ideas included Say's Law and Human Capital, just to give you the broad picture of what they think it's big). I will only comment very briefly on two issues, one related to the history of ideas and the other to the concept itself.The Economist suggests that the natural rate of unemployment can somehow be connected to the ideas of Keynes. In their...

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Do Phillips Curves Conditionally Help to Forecast Inflation?

AbstractThis paper reexamines the forecasting ability of Phillips curves from both an uncon- ditional and conditional perspective by applying the method developed by Giacomini and White (2006). We find that forecasts from our Phillips curve models tend to be unconditionally inferior to those from our univariate forecasting models. Significantly, we also find conditional inferiority, with some exceptions. When we do find improvement, it is asymmetric – Phillips curve forecasts tend to be...

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