The History of the Phillips Curve: Consensus and Bifurcation

2009/07/15 by ROBERT J. GORDON, Robert J. Gordon · 6 citations
Economics, Econometrics and Finance · #Monetary Policy and Economic Impact #Market Dynamics and Volatility #Economic Theory and Policy

paper · doi:10.1111/j.1468-0335.2009.00815.x

Abstract

While the early history of the Phillips curve up to 1975 is well known, less well understood is the post‐1975 fork in the road. The left fork developed a theory of policy responses to supply shocks in the context of price stickiness in the non‐shocked sector. Its econometric implementation interacts shocks with backward‐looking inertia. The right fork approach emphasizes forward‐looking expectations that can jump in response to anticipated policy changes. The left fork approach is better suited to explaining the postwar US inflation process, while the right fork approach is essential for understanding behaviour in economies with unstable macroeconomic environments.

Citations

• The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861–1957¹

Cited by

• The Formation of Expectations, Inflation, and the Phillips Curve
• Empirical Evidence on Inflation Expectations in the New Keynesian Phillips Curve
• A Traditional Nominal Wage Phillips Curve: Theory and Evidence
• Inflation, unemployment, and labor force. Phillips curves and long-term\n projections for Japan
• Interindustry linkages of prices-Analysis of Japan's deflation. [europepmc]
• Improving Inflation Forecasts Using Robust Measures [europepmc]

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