The Phillips curve becomes the Phillips cloud with no inexorable trade-off between inflation and unemployment.

Fiona Sydney

2019-08-02 17:39:00 Fri ET

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.

Blog+More

This infographic visualization summarizes the key habits and investment styles of highly successful entrepreneurs.

Chanel Holden

2017-12-19 09:39:00 Tuesday ET

This infographic visualization summarizes the key habits and investment styles of highly successful entrepreneurs.

From Oprah Winfrey​ to Bill Gates​, this infographic visualization summarizes the key habits and investment styles of highly successful entrepreneurs:

+See More

President Trump nominates Jerome Powell to be the new Federal Reserve chairman.

Fiona Sydney

2017-10-03 18:39:00 Tuesday ET

President Trump nominates Jerome Powell to be the new Federal Reserve chairman.

President Trump has nominated Jerome Powell to run the Federal Reserve once Fed Chair Janet Yellen's current term expires in February 2018. Trump's

+See More

Apple and Samsung are the archrivals for the title of the world's top smart phone maker.

Olivia London

2018-06-25 12:43:00 Monday ET

Apple and Samsung are the archrivals for the title of the world's top smart phone maker.

Apple and Samsung are the archrivals for the title of the world's top smart phone maker. The recent patent lawsuit settlement between Apple and Samsung

+See More

Berkeley macro economist Brad DeLong sees no good reasons for an imminent economic recession with mass unemployment and even depression.

Laura Hermes

2019-11-21 11:34:00 Thursday ET

Berkeley macro economist Brad DeLong sees no good reasons for an imminent economic recession with mass unemployment and even depression.

Berkeley macro economist Brad DeLong sees no good reasons for an imminent economic recession with mass unemployment and even depression. The current U.S. ec

+See More

Lyft seeks to go public with a dual-class stock ownership structure that allows the co-founders to retain significant influence.

Amy Hamilton

2019-03-11 10:32:00 Monday ET

Lyft seeks to go public with a dual-class stock ownership structure that allows the co-founders to retain significant influence.

Lyft seeks to go public with a dual-class stock ownership structure that allows the co-founders to retain significant influence over the rideshare tech unic

+See More

What are the best online stock market investment tools?

Amy Hamilton

2021-07-07 05:22:00 Wednesday ET

What are the best online stock market investment tools?

What are the best online stock market investment tools? Stock trading has seen an explosion since the start of the pandemic. As people lost their jobs an

+See More