Phillips Curve Model

Evidence and data

Read unemployment gaps together with expectations, wages, inflation breadth, and supply shocks. A flat slope does not mean labor markets never matter.

Calibration or measurement

The slope is regime dependent. Anchored expectations, bargaining institutions, import competition, and sectoral shocks change it.

Boundaries

• No stable policy menu after expectations adjust.
• Supply shocks can shift the curve.
• Natural-rate estimates are uncertain in real time.

Use guidance

When sufficient

Short-run inflation-unemployment relationship when expectations are reasonably anchored and supply shocks are not dominant. Useful for thinking about labor-market slack.

When sketch only

Do not read the slope as a stable structural parameter. The slope reflects the joint distribution of demand and supply shocks under the prevailing monetary regime; a regime change shifts the slope without changing the underlying friction.

When to switch

Switch to NKPC (theoretical:new-keynesian-phillips) when expectations and forward-looking pricing are central. Switch to a sticky-information Phillips curve when information frictions explain the slope better than sticky prices.

Falsification signal

A monetary tightening that lowers inflation expectations without measurably reducing slack falsifies a backward-looking accelerationist Phillips curve. The Volcker disinflation worked partly through expectations, not only through unemployment.