ME  Vol.5 No.3 , March 2014
The Modern Phillips Curve Revisited
Author(s) Jinpeng Ma*
ABSTRACT

The modern Phillips curve is about the relationship between the average rates of inflation and unemployment. We will provide additional empirical evidence in the US economy from 1948:01 to 2013:03 that helps demonstrate why such a relationship has been built on a wrong methodology, as revealed in Ma [1]. An erroneous approach can lead to a misunderstanding of business cycles and a wrongful implementation of monetary policy. In particular, the way how the two rates may evolve is now at a critical moment for the Fed to decide if an exit from its quantitative easing should be initiated.


Cite this paper
Ma, J. (2014) The Modern Phillips Curve Revisited. Modern Economy, 5, 188-200. doi: 10.4236/me.2014.53020.
References
[1]   Ma, J. (2012) Mystery of Modern Phillips Curve. Modern Economy, 3, 907-914.
http://dx.doi.org/10.4236/me.2012.38113

[2]   Phillips, A.W. (1958) The Relation between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861-1957. Economica, 25, 283-299.

[3]   Friedman, M. (1968) The Role of Monetary Policy. American Economic Review, 58, 1-17.

[4]   Phelps, E.S. (1967) Phillips Curves, Expectations of Inflation and Optimal Unemployment over Time. Economica, 34, 254-281. http://dx.doi.org/10.2307/2552025

[5]   Lucas, R.E. (1981) Studies in Business Cycle Theory. The M.I.T. Press, Cambridge.

[6]   Ma, J. and Tang, M. (2012) Forecast Post-World War II Recessions in Real Time. Rutgers University, Camden.

[7]   Temin, P. (1998) The Causes of American Business Cycles: An Essay in Economic Historiography. NBER Working Paper Series, wp6692.

[8]   Shapiro, C. and Stiglitz, J. (1984) Equilibrium Unemployment as a Worker Discipline Device. American Economic Review, 74, 433-444.

[9]   Hardin, G. (1968) The Tragedy of the Commons. Science, 162, 1243-1248.
http://dx.doi.org/10.1126/science.162.3859.1243

 
 
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