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2022-01-11

Fed’s view of the Phillips curve

Fed officials have pronounced that the Phillips curve is dead because unemployment is below its “natural rate” (where the economy is at a full employment level). That supposedly meant higher employment rates are no longer an important factor driving inflation higher.

Research that I presented with co-authors at the US Monetary Policy Forum several years ago suggests that the Phillips curve is not dead, but rather is hibernating.

Unfortunately, past economic research indicates that the natural rate of unemployment is a number that is notoriously hard to estimate

Fed needs to recognise the flaws in its monetary policy framework and return to more pre-emptive policies to control inflation. 

If it doesn’t, the outcome will not only be persistent inflation well above the 2 per cent objective, but eventually far higher interest rates to drive inflation back down, which will do serious harm to the economy.

Frederic Mishkin 10 January 2022



Death of the Phillips curve - Nonsens.

If the economy takes off above Stall Speed the Philips Curve will be back.

Englund 2017


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