Inflation Expectations, the Phillips Curve, and Stock Prices

RePEc Short ID: pnu74
ORCID iD: 0000-0003-4692-8771

Lansing, Kevin J.; Nucera, Federico C.

Journal Article

Inflation Expectations, the Phillips Curve, and Stock Prices

Abstract: During the 1970s and early 1980s, rises in inflation tended to coincide with weaker economic activity and lower stock prices. But in more recent decades, rises in inflation have tended to coincide with stronger economic activity and higher stock prices. The emergence of a pattern where inflation, economic activity, and stock prices all move together over the business cycle can be traced to the beneficial effects of well-anchored inflation expectations.

Keywords: inflation expectations; inflation; Phillips Curve; stock prices;