Article ID Journal Published Year Pages File Type
5103630 The Quarterly Review of Economics and Finance 2017 15 Pages PDF
Abstract
In this paper a brief history of the Phillips curve is sketched. Empirical evidence from France, Germany, the United Kingdom and the United States during the latter half of the 20th century in support of a positive long-run relationship between price inflation and unemployment is presented. In order to reconcile the predominant theoretical view, which holds that inflation is neutral in the long run, with the observed data, two arguments are outlined, both of which build on unintended consequences of monetary expansion: (1) redistributional effects on incomes and wealth, and (2) business cycle fluctuations. The analysis hinges on further political interventions in response to these consequences, which tend to increase unemployment as they render labor markets less flexible. In this sense the relationship between price inflation and unemployment over the past 60 years can in part be interpreted as the outcome of an interventionist spiral.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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