In 1958, A.W. Phillips discovered a strong negative correlation between inflation and unemployment in United Kingdom data. Continuing controversy surrounds the long-run trade-off suggested by a curve he drew through these observations. We conduct a wide-ranging investigation of the post-war U.S. Phillips correlations and Phillips curve. Many economists view the Phillips correlations as chimeric...

The studies on Phillips curves relating the rate of unemployment to the rate of inflation are the results of the search for a reliable tool for forecasting inflation and implementing monetary policy. The original Phillips curve has attracted considerable attention and since then, it has undergone several important changes. Although the evidence of a negative relationship between the rate of cha...

Rational expectations are at the heart of the DSGE models maintained by central banks. A key equation which governs the evolution of prices in those models is the New Keynesian Phillips (NKPC) curve, in which today‟s rate of inflation is linked to expected future inflation. Expected future inflation is in turn modeled using rational expectations, which operationally means that forecast errors a...

This paper examines some standard open-economy New Keynesian models to address the question of how globalisation affects the inflation process. Specifically, it investigates how the Phillips curve for consumer price inflation in a country is affected by openness, and how the optimal choice of monetary policy is influenced by openness. The paper compares models that assume producer currency pric...

The paper shows that Liquidity Deflation, a liquidity-drainage mechanism associated with Safe Asset Shortage, helps to rationalize supply-side liquidity trap and involuntary unemployment under wage/price flexibility, especially in economies that suffered massive liquidity destruction, like advanced economies in the wake of the Lehman crisis. Moreover, Liquidity Deflation is shown to imply defla...