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Federal Reserve Bank of Philadelphia
Business Review
The Taylor curve and the unemployment-inflation tradeoff.
Satyajit Chatterjee
Abstract

The subject of our next article, "The Taylor Curve and the Unemployment-Inflation Tradeoff," by Satyajit Chatterjee, is finding an optimal monetary policy menu. In the past, monetary policy options were described in terms of a tradeoff between the unemployment rate and the inflation rate, the so-called Phillips curve. Macroeconomists no longer view the Phillips curve as a viable “policy menu” because its use as such is inconsistent with mainstream macroeconomic theory. In the late 1970s, John Taylor suggested an alternative set of options for policymakers to consider, one that is consistent with macroeconomic theory. These alternative options involve a tradeoff between the variability of output and the variability of inflation


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Satyajit Chatterjee, "The Taylor curve and the unemployment-inflation tradeoff." , Federal Reserve Bank of Philadelphia, Business Review, issue Q3, pages 26-33, 2002.
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Keywords: Unemployment ; Inflation (Finance) ; Monetary policy
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