Post on 14-Nov-2014
The Phillips Curve and its
Modifications
The Phillips Curve and its
Modifications
Phillips Curve and its ModificationsPhillips Curve and its Modifications
The originalPhillips curveThe original
Phillips curve
0
1
2
3
4
5
6
7
8
9
0 1 2 3 4 5 6
The original Phillips curveThe original Phillips curve
Unemployment (%)
Wa
ge in
flatio
n (
%)
Phillips Curve and its ModificationsPhillips Curve and its Modifications
The unemployment- inflation relationship since the late 1960s
The unemployment- inflation relationship since the late 1960s
Inflation (%)
Unemployment (%)
The breakdown of the Phillips curve?The breakdown of the Phillips curve?
6763
6265
6664
60
61
0
2
4
6
8
10
12
14
16
18
20
22
24
26
0 1 2 3 4 5 6 7 8 9 10 11 12 13
Inflation (%)
Unemployment (%)
The breakdown of the Phillips curve?The breakdown of the Phillips curve?
6763
6265
6664
60
61
0
2
4
6
8
10
12
14
16
18
20
22
24
26
0 1 2 3 4 5 6 7 8 9 10 11 12 13
Original Phillips curve
74
7173
7072
Inflation (%)
Unemployment (%)
The breakdown of the Phillips curve?The breakdown of the Phillips curve?
6968
6763
6265
6664
60
61
0
2
4
6
8
10
12
14
16
18
20
22
24
26
0 1 2 3 4 5 6 7 8 9 10 11 12 13
75
74
76
77
79
7173
7072
78
Inflation (%)
Unemployment (%)
The breakdown of the Phillips curve?The breakdown of the Phillips curve?
6968
6763
6265
6664
60
61
0
2
4
6
8
10
12
14
16
18
20
22
24
26
0 1 2 3 4 5 6 7 8 9 10 11 12 13
0
2
4
6
8
10
12
14
16
18
20
22
24
26
0 1 2 3 4 5 6 7 8 9 10 11 12 13
75
74
8076
77
79
7173
7072
78 82
8384
85
81
Inflation (%)
Unemployment (%)
The breakdown of the Phillips curve?The breakdown of the Phillips curve?
6968
6763
6265
6664
60
61
75
74
8076
77
79
7173
7072
78
90
89
9188
95
82
8384
85
86
93
8792
94
81
Inflation (%)
Unemployment (%)
The breakdown of the Phillips curve?The breakdown of the Phillips curve?
6968
6763
6265
6664
60
61
0
2
4
6
8
10
12
14
16
18
20
22
24
26
0 1 2 3 4 5 6 7 8 9 10 11 12 13
0
2
4
6
8
10
12
14
16
18
20
22
24
26
0 1 2 3 4 5 6 7 8 9 10 11 12 13
75
74
8076
77
79
7173
7072
78
90
89
9796
9188
95
82
8384
85
86
93
8792
94
81
Inflation (%)
Unemployment (%)
The breakdown of the Phillips curve?The breakdown of the Phillips curve?
6968
6763
6265
6664
60
6199
9800
01
03
02
Phillips Curve and its ModificationsPhillips Curve and its Modifications
A short-runPhillips curveA short-run
Phillips curve
O
P (%).
U (%)
aP1
.
U1
P2
.
U2
A Phillips curveA Phillips curve
b
Phillips Curve and its ModificationsPhillips Curve and its Modifications
The accelerationist theory of inflation
The accelerationist theory of inflation
0
4
8
12
16
20
0
P (%).
U (%)6 8I (Pe = 0)
.
b
The accelerationist theory of inflationThe accelerationist theory of inflation
a
IV (Pe = 12%).
III (Pe = 8%).
II (Pe = 4%)
P (%).
U (%)6
a
b c
d
8I (Pe = 0)
.
.
e
The accelerationist theory of inflationThe accelerationist theory of inflation
f
0
4
8
12
16
20
0
Phillips Curve and its ModificationsPhillips Curve and its Modifications
A vertical long-run Phillips curve
A vertical long-run Phillips curve
Un
0
4
8
12
16
20
0
P (%).
U (%)6 8
The long-run Phillips curveThe long-run Phillips curve
Phillips Curve and its ModificationsPhillips Curve and its Modifications
The effects of deflationary policy
The effects of deflationary policy
0
2
4
6
8
10
12
14
16
18
20
22
24
0
P (%).
U (%)8 13
J
X (Pe = 20%).
k
The effects of deflationThe effects of deflation
0
2
4
6
8
10
12
14
16
18
20
22
24
0
P (%).
U (%)8 13
k
X (Pe = 20%).
XI (Pe = 18%).
XII (Pe = 16%).
l
J
m
The effects of deflationThe effects of deflation
0
2
4
6
8
10
12
14
16
18
20
22
24
0
P (%).
U (%)8 13
k
l
m
a
J
The effects of deflationThe effects of deflation
Phillips Curve and its ModificationsPhillips Curve and its Modifications
Phillips loopsPhillips loops
Year 20
20
0
P (%).
U (%)Un
ab
c
Year 0, 1
Clockwise Phillips loopsClockwise Phillips loops
Year 5
Year 4
0
20
0
P (%).
U (%)Un
ab
c
d
ef
Year 0, 1
Year 2
Year 3
Clockwise Phillips loopsClockwise Phillips loops
0
20
0
P (%).
U (%)Un
ab
c
d
ef
h
i
J
Year 0, 1, 10
Year 2, 9
Year 3, 8
Year 4, 7
Year 5, 8
g
Clockwise Phillips loopsClockwise Phillips loops
Phillips Curve and its ModificationsPhillips Curve and its Modifications
Phillips loopsin the UK?
Phillips loopsin the UK?
Inflation (%)
Unemployment (%)
6763
6265
6664
60
61
0
2
4
6
8
10
12
14
16
18
20
22
24
26
0 1 2 3 4 5 6 7 8 9 10 11 12 13
Phillips loops in the UK?Phillips loops in the UK?
Inflation (%)
Unemployment (%)
6763
6265
6664
60
61
0
2
4
6
8
10
12
14
16
18
20
22
24
26
0 1 2 3 4 5 6 7 8 9 10 11 12 13
Original Phillips curve
Phillips loops in the UK?Phillips loops in the UK?
0
2
4
6
8
10
12
14
16
18
20
22
24
26
0 1 2 3 4 5 6 7 8 9 10 11 12 13
74
7173
7072
Inflation (%)
Unemployment (%)
6968
6763
6265
6664
60
61
Phillips loops in the UK?Phillips loops in the UK?
0
2
4
6
8
10
12
14
16
18
20
22
24
26
0 1 2 3 4 5 6 7 8 9 10 11 12 13
75
74
8076
77
79
7173
7278
90
89
97
96
9188
95
82
8384
85
86
93
8792
94
81
Inflation (%)
Unemployment (%)
99
98
Phillips loops in the UK?Phillips loops in the UK?
0001
02
0
2
4
6
8
10
12
14
16
18
20
22
24
26
0 1 2 3 4 5 6 7 8 9 10 11 12 13
75
74
8076
77
79
7173
7278
90
89
97
96
9188
95
82
8384
85
86
93
8792
94
81
Inflation (%)
Unemployment (%)
99
98
Phillips loops in the UK?Phillips loops in the UK?
0001
02
0
2
4
6
8
10
12
14
16
18
20
22
24
26
0 1 2 3 4 5 6 7 8 9 10 11 12 13
75
74
8076
77
79
7173
7278
90
89
97
96
9188
95
82
8384
85
86
93
8792
94
81
Inflation (%)
Unemployment (%)
99
98
Phillips loops in the UK?Phillips loops in the UK?
0001
02
0
2
4
6
8
10
12
14
16
18
20
22
24
26
0 1 2 3 4 5 6 7 8 9 10 11 12 13
75
74
8076
77
79
7173
7278
90
89
97
96
9188
95
82
8384
85
86
93
8792
94
81
Inflation (%)
Unemployment (%)
99
98
Phillips loops in the UK?Phillips loops in the UK?
0001
02
0
2
4
6
8
10
12
14
16
18
20
22
24
26
0 1 2 3 4 5 6 7 8 9 10 11 12 13
75
74
8076
77
79
7173
7278
90
89
97
96
9188
95
82
8384
85
86
93
8792
94
81
Inflation (%)
Unemployment (%)
99
98
Phillips loops in the UK?Phillips loops in the UK?
0001
02
0
2
4
6
8
10
12
14
16
18
20
22
24
26
0 1 2 3 4 5 6 7 8 9 10 11 12 13
75
74
8076
77
79
7173
7278
90
89
97
96
9188
95
82
8384
85
86
93
8792
94
81
Inflation (%)
Unemployment (%)
99
98
Phillips loops in the UK?Phillips loops in the UK?
0001
02