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11 posts from September 2020

September 18, 2020

What’s Up with the Phillips Curve?



U.S. inflation used to rise during economic booms, as businesses charged higher prices to cope with increases in wages and other costs. When the economy cooled and joblessness rose, inflation declined. This pattern changed around 1990. Since then, U.S. inflation has been remarkably stable, even though economic activity and unemployment have continued to fluctuate. For example, during the Great Recession unemployment reached 10 percent, but inflation barely dipped below 1 percent. More recently, even with unemployment as low as 3.5 percent, inflation remained stuck under 2 percent. What explains the emergence of this disconnect between inflation and unemployment? This is the question we address in “What’s Up with the Phillips Curve?,” published recently in Brookings Papers on Economic Activity.

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Posted by Blog Author at 7:00 AM in DSGE, Inflation, Macroecon, Monetary Policy, Phillips Curve, Unemployment | Permalink | Comments (3)

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