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 ME  Vol.5 No.3 , March 2014
The Modern Phillips Curve Revisited
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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