Single-equation economic model relating wages to unemployment
For the Phillips curve in supernova astrophysics, see Phillips relationship.
This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. Find sources: "Phillips curve" – news · newspapers · books · scholar · JSTOR(October 2011) (Learn how and when to remove this message)
Part of a series on
Macroeconomics
Basic concepts
Aggregate demand
Aggregate supply
Business cycle
Deflation
Demand shock
Disinflation
Effective demand
Expectations
Adaptive
Rational
Financial crisis
Growth
Inflation
Demand-pull
Cost-push
Interest rate
Investment
Liquidity trap
Measures of national income and output
GDP
GNI
NNI
Microfoundations
Money
Endogenous
Money creation
Demand for money
Liquidity preference
Money supply
National accounts
SNA
Nominal rigidity
Price level
Recession
Shrinkflation
Stagflation
Supply shock
Saving
Unemployment
Policies
Fiscal
Monetary
Commercial
Central bank
Universal basic income
Models
IS–LM
AD–AS
Keynesian cross
Multiplier
Accelerator
Phillips curve
Arrow–Debreu
Harrod–Domar
Solow–Swan
Ramsey–Cass–Koopmans
Overlapping generations
General equilibrium
DSGE
Endogenous growth
Matching theory
Mundell–Fleming
Overshooting
NAIRU
Related fields
Econometrics
Economic statistics
Monetary economics
Development economics
International economics
Schools
Mainstream
Keynesian
Neo-
New
Monetarism
New classical
Real business-cycle theory
Stockholm
Supply-side
New neoclassical synthesis
Saltwater and freshwater
Heterodox
Austrian
Chartalism
Modern monetary theory
Ecological
Post-Keynesian
Circuitism
Disequilibrium
Marxian
Market monetarism
People
François Quesnay
Adam Smith
Thomas Robert Malthus
Karl Marx
Léon Walras
Knut Wicksell
Irving Fisher
Wesley Clair Mitchell
John Maynard Keynes
Alvin Hansen
Michał Kalecki
Gunnar Myrdal
Simon Kuznets
Joan Robinson
Friedrich Hayek
John Hicks
Richard Stone
Hyman Minsky
Milton Friedman
Paul Samuelson
Lawrence Klein
Edmund Phelps
Robert Lucas Jr.
Edward C. Prescott
Peter Diamond
William Nordhaus
Joseph Stiglitz
Thomas J. Sargent
Paul Krugman
N. Gregory Mankiw
See also
Macroeconomic model
Publications in macroeconomics
Economics
Applied
Microeconomics
Political economy
Mathematical economics
Money portal
Business portal
v
t
e
The Phillips curve is an economic model, named after Bill Phillips, that correlates reduced unemployment with increasing wages in an economy.[1] While Phillips did not directly link employment and inflation, this was a trivial deduction from his statistical findings. Paul Samuelson and Robert Solow made the connection explicit and subsequently Milton Friedman[2] and Edmund Phelps[3][4] put the theoretical structure in place.
While there is a short-run tradeoff between unemployment and inflation, it has not been observed in the long run.[5] In 1967 and 1968, Friedman and Phelps asserted that the Phillips curve was only applicable in the short run and that, in the long run, inflationary policies would not decrease unemployment.[2][3][4][6] Friedman correctly predicted the Stagflation of the 1970's.[7]
In the 2010s[8] the slope of the Phillips curve appears to have declined and there has been controversy over the usefulness of the Phillips curve in predicting inflation. A 2022 study found that the slope of the Phillips curve is small and was small even during the early 1980s.[9] Nonetheless, the Phillips curve is still used by central banks in understanding and forecasting inflation.[10]
^AW Phillips, ‘The Relation between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom 1861–1957’ (1958) 25 Economica 283, referring to unemployment and the "change of money wage rates".
^ abFriedman, Milton (1968). "The Role of Monetary Policy". American Economic Review. 58 (1): 1–17. JSTOR 1831652.
^ abPhelps, Edmund S. (1968). "Money-Wage Dynamics and Labor Market Equilibrium". Journal of Political Economy. 76 (S4): 678–711. doi:10.1086/259438. S2CID 154427979.
^ abPhelps, Edmund S. (1967). "Phillips Curves, Expectations of Inflation and Optimal Unemployment over Time". Economica. 34 (135): 254–281. doi:10.2307/2552025. JSTOR 2552025.
^Chang, R. (1997) "Is Low Unemployment Inflationary?" Archived 2016-10-05 at the Wayback Machine Federal Reserve Bank of Atlanta Economic Review 1Q97:4-13
^Phelan, John (23 October 2012). "Milton Friedman and the rise and fall of the Phillips Curve". thecommentator.com. Retrieved September 29, 2014.
^Krugman, Paul R. (1995). Peddling prosperity: economic sense and nonsense in the age of diminished expectations. New York: W. W. Norton. p. 43. ISBN 978-0393312928.
^"The Phillips curve may be broken for good". The Economist. 2017.
^Hazell, Jonathon; Herreño, Juan; Nakamura, Emi; Steinsson, Jón (2022). "The Slope of the Phillips Curve: Evidence from U.S. States" (PDF). Quarterly Journal of Economics. 137 (3): 1299–1344. doi:10.1093/qje/qjac010.
^"Speech by Chair Yellen on inflation, uncertainty, and monetary policy". Board of Governors of the Federal Reserve System. Retrieved 2017-09-30.
The Phillipscurve is an economic model, named after Bill Phillips, that correlates reduced unemployment with increasing wages in an economy. While Phillips...
long-run Phillipscurve. While the short-run Phillipscurve is based on a constant rate of inflationary expectations, the long-run Phillipscurve reflects...
explanation of price levels and inflation, later Keynesians adopted the Phillipscurve to model price-level changes. Some Keynesians opposed the synthesis...
Friedman argued that a natural rate of inflation followed from the Phillipscurve. This showed wages tend to rise when unemployment is low. Friedman argued...
rising prices, i.e. inflation. Phillips' findings were confirmed by other empirical analyses and became known as a Phillipscurve. It quickly became central...
exclusive, the relationship between the two being described by the Phillipscurve. Stagflation is very costly and difficult to eradicate once it starts...
by new Keynesian economics is a model of inflation derived from the PhillipsCurve and given its name by Robert J. Gordon. The model views inflation as...
Keynesian Phillipscurve says that this period's inflation depends on current output and the expectations of next period's inflation. The curve is derived...
between output and prices represented by the Phillipscurve, but the function breaks from the Phillipscurve since only unanticipated price level changes...
economic activity, hence reducing output. The AS curve is upward sloping following a standard modern Phillipscurve thought, in which a higher level of economic...
framework of the Phillipscurve. Milton Friedman, assuming adaptive expectations, distinguished a series of short-run Phillipscurves and a long-run one...
below this rate would cause inflation to accelerate. He argued that the Phillipscurve was in the long run vertical at the "natural rate" and predicted what...
Phillips 66. ConocoPhillips, American energy company Phillips 66, American energy company Phillips Petroleum Company, American oil company Phillips (auctioneers)...
it is possible to move along a short run PhillipsCurve (even though the NAIRU theory says that this curve shifts in the longer run) so that unemployment...
Robert Solow, helped develop and popularize the mathematics of the PhillipsCurve. The curve suggested that unemployment and inflation were inversely related;...
unemployment, according to a 1976 analysis. Both the Beveridge curve and the Phillipscurve bear implicit macroeconomic notions of equilibrium in markets...
rational expectations. It delivered a new classical explanation of the Phillipscurve relationship between unemployment and inflation. The model was formulated...
framework. These fundamental tools, which combine the IS-LM model with the Phillipscurve, made it possible to ascertain the macroeconomist's primary interest...
developed, unemployment was shown to reduce inflation, following the Phillipscurve, or to decelerate inflation, following the NAIRU/natural rate of unemployment...
current profits and current cash flow. In addition, Keynesians posited a Phillipscurve that tied nominal wage inflation to unemployment rate. To support these...
The Phillips Machine, also known as the MONIAC (Monetary National Income Analogue Computer), Phillips Hydraulic Computer and the Financephalograph, is...