Reducing Inflation along a Nonlinear Phillips Curve

RePEc Short ID: ppe260
ORCID iD: 0000-0002-2216-110X

Crust, Erin E.; Lansing, Kevin J.; Petrosky-Nadeau, Nicolas

Journal Article

Reducing Inflation along a Nonlinear Phillips Curve

Abstract: Inflation has climbed since 2021, as the labor market has tightened. Two historical data relationships can account for elevated inflation over the past two years: the Beveridge curve, which relates job vacancies and unemployment rates over the business cycle, and a nonlinear version of the Phillips curve, which links inflation to labor market slack. Combining estimates of the two curves implies that inflation can fall in conjunction with a “soft landing” for the economy if labor market easing is achieved mainly by reducing job vacancies rather than increasing unemployment.

Keywords: inflation; Phillips Curve; Beveridge curve; job vacancies; unemployment;