The Slope of the Phillips Curve: Evidence from U.S. States

By Jonathon Hazell, J. Herreño, Emi Nakamura, Jón Steinsson. Social Science Research Network, 2020

160 citations recorded by the source corpus.

We estimate the slope of the Phillips curve in the cross section of U.S. states using newly constructed state-level price indexes for non-tradeable goods back to 1978. Our estimates indicate that the Phillips curve is very flat and was very flat even during the early 1980s. We estimate only a modest decline in the slope of the Phillips curve since the 1980s. We use a multi-region model to infer the slope of the aggregate Phillips curve from our regional estimates. Applying our estimates to recent unemployment dynamics yields essentially no missing disinflation or missing reinflation over the past few business cycles. Our results imply that the sharp drop in core inflation in the early 1980s was mostly due to shifting expectations about long-run monetary policy as opposed to a steep Phillips curve, and the greater stability of inflation since the 1990s is mostly due to long-run inflationary expectations becoming more firmly anchored.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/57871a7ab331dfeb4f548c3f621c5336ad43d425

Citations in the corpus

• What's Up with the Phillips Curve? (2020, unknown): “Hazell et al. (2020) provide a guide to translate this cross-sectional evidence into the time-series elasticity that is of interest to most of the macroeconomics literature.”