Inflation Expectations and the Phillips Curve: Then and Now

Harald Hagemann

A chapter in Expectations, 2020, pp 131-144 from Springer

Abstract: Abstract The Phillips curve has been in the focus of many key debates in macroeconomics ever since Samuelson and Solow (1960) modified the original curve in linking the unemployment rate to the inflation rate. This essay analyzes the links of the modern discussion to the debates over time highlighting similarities, differences, and ways ahead regarding the formation of inflation expectations. Whereas Sect. 2 gives a rational reconstruction from static via extrapolative and adaptive to rational expectations, the historical reconstruction in Sect. 3 challenges widespread fictitious stories that there exists a one-way avenue of progress in the sophistication of expectations. In the concluding section, some relevant issues of the current debates are addressed as the anchoring of inflation expectations as a precondition for keeping inflation targets and the question whose expectations are most relevant for wage and price setting.

Keywords: Accelerationist hypothesis; Adaptive expectations; Inflation expectations; Phillips curve; Rational expectations; B22; E31; D84 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:spr:spshcp:978-3-030-41357-6_8

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DOI: 10.1007/978-3-030-41357-6_8

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