It has been a long-held article of faith among central bank policy makers that there is no such thing as a free lunch – because monetary policy that aims for lower unemployment will result in higher inflation. Crunching the numbers leads economist Olivier Blanchard to revisit a policy favorite of the 1960s, the Phillips Curve, and to offer a Mad Men twist to central bankers’ arsenals. He posits that a free lunch may be possible, at least for a while, as long as the economy resists the temptations of gluttony. getAbstract recommends this thought-provoking contribution to discussions on monetary policy to economists and financial services professionals.
In this summary, you will learn
- How the Phillips Curve has evolved in the United States,
- Why lower unemployment has a muted impact on inflation today and
- Why central bankers should consider “flexible inflation targeting.”
About the Author
Olivier Blanchard, formerly research director at the International Monetary Fund, is a senior fellow at the Peterson Institute for International Economics.