Summary of The US Phillips Curve

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Recommendation

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.

 

Summary

The conduct of US monetary policy is challenging central bankers: Inflation’s behavior since the 2008 global financial crisis has been atypical of previous trends. The policies the Federal Reserve pursued in the 1960s and 1970s adhered to the principle of a trade-off between higher inflation and lower...

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