2019-08-02 17:39:00 Fri ET
federal reserve monetary policy treasury dollar employment inflation interest rate exchange rate macrofinance recession systemic risk economic growth central bank fomc greenback forward guidance euro capital global financial cycle credit cycle yield curve
The Phillips curve becomes the Phillips cloud with no inexorable trade-off between inflation and unemployment. Stanford finance professor John Cochrane disagrees with Harvard macro economist Gregory Mankiw with respect to the mysterious and inexorable trade-off between inflation and unemployment. It is difficult to depict a key downward Phillips curve for the post-war period because there is no conclusive trade-off between inflation and unemployment. This empirical result remains true even when we consider alternative measures of U.S. inflation such as the deflator for personal consumption expenditures (PCE) and core consumer price index (CPI) inflation less food and energy. Furthermore, the empirical result continues to hold in practice when we consider the economic output gap in lieu of the unemployment rate. Cochrane suggests no clear trade-off between inflation and unemployment in the Phillips cloud. In other words, the Phillips curve is too flat to be true.
This analysis poses a conceptual challenge to New Keynesians who seek to attain the Federal Reserve dual mandate of both price stability and maximum sustainable employment. The central bank can constrain money supply growth as a potential source of economic disturbance; yet, the long-term welfare cost of low inflation has no real impact on economic output, employment, and capital investment.
If any of our AYA Analytica financial health memos (FHM), blog posts, ebooks, newsletters, and notifications etc, or any other form of online content curation, involves potential copyright concerns, please feel free to contact us at service@ayafintech.network so that we can remove relevant content in response to any such request within a reasonable time frame.
2023-06-28 09:29:00 Wednesday ET

Carmen Reinhart and Kenneth Rogoff delve into several centuries of cross-country crisis data to find the key root causes of financial crises for asset marke
2018-07-25 11:41:00 Wednesday ET

President Trump hails and touts America's new high real GDP economic growth in 2018Q2. The U.S. is now a $20+ trillion economy, and America hits this mi
2018-06-03 07:35:00 Sunday ET

Several recent events explain why Trump may undermine multilateral world order. First, Trump withdraws the U.S. from the 12-nation Trans-Pacific Partnership
2025-02-02 11:28:00 Sunday ET

Our proprietary alpha investment model outperforms most stock market indexes from 2017 to 2025. Our proprietary alpha investment model outperforms the ma
2018-08-21 11:40:00 Tuesday ET

President Trump criticizes his new Fed Chair Jerome Powell for accelerating the current interest rate hike with greenback strength. This criticism overshado
2025-05-29 08:25:28 Thursday ET

Serial venture capitalist Ben Horowitz describes many hard truths, lessons, and insights from his entrepreneurial journey of running LoudCloud from a Silico