The Phillips Multiplier

Régis Barnichon and Geert Mesters

No 13480, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We propose a model-free approach for determining the inflation-unemployment trade-off faced by a central bank, i.e., the ability of a central bank to transform unemployment into inflation (and vice versa) via its interest rate policy. We introduce the Phillips multiplier as a statistic to non-parametrically characterize the trade-off and its dynamic nature. We compute the Phillips multiplier for the US, UK and Canada and document that the trade-off went from being very large in the pre-1990 sample period to being small (but significant) post-1990 with the onset of inflation targeting and the anchoring of inflation expectations.

Keywords: Marginal rate of transformation; Inflation-unemployment trade-off; Dynamic multiplier; Instrumental variables; Phillips curve (search for similar items in EconPapers)
JEL-codes: C14 C32 E32 E52 (search for similar items in EconPapers)
Date: 2019-01
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (15)

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Related works:
Journal Article: The Phillips multiplier (2021)
Working Paper: The Phillips Multiplier (2019)
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