Home About Latest Browse RSS Advanced Search

Federal Reserve Bank of Dallas
Working Papers
The Death of the Phillips Curve?
Anthony Murphy
Abstract

Are inflation dynamics well captured by Phillips Curve models, or has this framework become less relevant over time? The evidence for the U.S. suggests that the slopes of the price and wage Phillips Curves– the short-run inflation-unemployment trade-offs – are low and have got a little flatter. For example, the recursive estimate of the unemployment coefficient in the core PCE Phillips Curve has fallen a little from -0.09 to -0.07 since the Great Recession. However, the decline is not statistically significant. Dynamic forecasts from the wage and price Phillips Curves estimated using data ending in 2007q4, almost 10 years ago, are pretty close to inflation today. This suggests that (i) low current inflation is not that surprising, and (ii) factors such as increased globalization, increased e-commerce activity, changes in concentration, the aging of the U.S. population and mismeasurement of the NAIRU are not that important (or offset each other). The Phillips Curve is still a useful, albeit imprecise, framework for understanding inflation.


Download Full text
Cite this item
Anthony Murphy, The Death of the Phillips Curve?, Federal Reserve Bank of Dallas, Working Papers 1801, 01 Jan 2018.
More from this series
JEL Classification:
Subject headings:
Keywords: inflation; wage inflation; Phillips Curve; slack
DOI: 10.24149/wp1801
For corrections, contact Amy Chapman ()
Fed-in-Print is the central catalog of publications within the Federal Reserve System. It is managed and hosted by the Economic Research Division, Federal Reserve Bank of St. Louis.

Privacy Legal