What’s Up with the Phillips Curve?

William Chen, Marco Del Negro, Michele Lenza, Giorgio Primiceri and Andrea Tambalotti

No 20200918a, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: 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.

Keywords: inflation; unemployment; monetary policy trade-off; VARs; DSGE models (search for similar items in EconPapers)
JEL-codes: E2 E52 (search for similar items in EconPapers)
Date: 2020-09-18
New Economics Papers: this item is included in nep-mac and nep-mon
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Working Paper: What’s up with the Phillips Curve? (2020)
Working Paper: What’s up with the Phillips Curve? (2020)
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