Reducing Inflation along a Nonlinear Phillips Curve

Erin E. Crust, Kevin Lansing and Nicolas Petrosky-Nadeau

FRBSF Economic Letter, 2023, vol. 2023, issue 17, 5

Abstract: Inflation has climbed since 2021, as the labor market has tightened. Two historical data relationships can account for elevated inflation over the past two years: the Beveridge curve, which relates job vacancies and unemployment rates over the business cycle, and a nonlinear version of the Phillips curve, which links inflation to labor market slack. Combining estimates of the two curves implies that inflation can fall in conjunction with a “soft landing” for the economy if labor market easing is achieved mainly by reducing job vacancies rather than increasing unemployment.

Keywords: inflation; Phillips Curve; Beveridge curve; job vacancies; unemployment (search for similar items in EconPapers)
Date: 2023
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