The curve first drawn by A.W. Phillips in 1958, highlighting a negative relationship between wage inflation and unemployment, figured prominently in the theory and practice of macroeconomic policy during 1958-1996. Within a decade of Phillips' analysis, the idea of a relatively stable long-run tradeoff between price inflation and unemployment was firmly built into policy analysis in the US and other countries. This article reviews the evolving role of the Phillips curve as an element of macroeconomic policy during 1958-1996, as well as academic and central bank research on it, via a series of snapshots over this roughly 40-year period. In conducting the research summarized in this article, the author's motivation is to better understand the mindset about the tradeoff between inflation and unemployment over an important period of US history with an eye toward ultimately better understanding the joint behavior of the Federal Reserve and the US economy during that period.
Economic Quarterly—Volume 94, Number 4—Fall 2008—Pages 311–359 The Phillips Curve and U.S. Macroeconomic Policy: Snapshots, 1958–1996 Robert G. King T he curve ﬁrst drawn by A.W. Phillips in 1958, highlighting a negative relationship between wage inﬂation and unemployment, ﬁgured prominently in the theory and practice of macroeconomic policy during 1958–1996. Within a decade of Phillips’ analysis, the idea of a relatively stable long- run tradeoff between price inﬂation and unemployment was ﬁrmly built into policy analysis in the United States and other countries. Such a long-run tradeoff was at the core of most prominent macroeconometric models as of 1969. Over the ensuing decade, the United States and other countries experi- enced stagﬂation, a simultaneous rise of unemployment and inﬂation, which threw the consensus about the long-run Phillips curve into disarray. By the end of the 1970s, inﬂation was historically high—near 10 percent—and poised to rise further. Economists and policymakers stressed the role of shifting ex- pectations of inﬂation and differed widely on the costliness of reducing inﬂa- tion, in part based on alternative views of the manner in which expectations wer
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