Global Chapter 8: Phillips Curve

Phillips Curve

the tradeoff between unemployment and inflation

Modified Phillips Curve

The curve that plots the change in the inflation rate against the unemployment rate. Also called an expectations-augmented Phillips curve or an accelerationist Phillips curve

modified phillips curve equation

π(t)- π(t-1) = - α (u(t)-un)

Phillips curve equation

π = πe + (m+z) - αu(t)

Non-accelerating inflation rate of unemployment (NAIRU)

The natural rate of unemployment is the rate of unemployment required to keep inflation constant. AKA another name for natural rate

Labor market rigidities

Factors, like minimum wage laws, preventing the forces of supply and demand from operating in the labor market.

when did the phillips curve fall apart?

1970s the negative relationship had broken down