The Flattening of the Phillips Curve: Policy Implications Depend on the Cause

摘要: According to the historical relationship known as Phillips curve, strengthening of economy is commonly associated with increasing inflation. With inflation having only modestly picked up in past few years has become more robust, many believe curve weakened, becoming flatter. I show that flattening can be due very different types structural changes and knowing type change occurred crucial for choosing appropriate monetary policy.