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Phillips curve |
Also found in: Dictionary/thesaurus, Financial, Wikipedia, Hutchinson | 0.01 sec. |
Phillips curveGraphic representation of the inverse relationship between the rate of unemployment and the rate of change in money wages. In 1958 A. W. Phillips plotted British unemployment rates and rates of change in money wages and found that when unemployment rates were low, employers were more likely to bid wages up to lure good employees away from their competitors. He claimed that this was a stable relationship. In the 1960s macroeconomists substituted the rate of price inflation for the rate of change in money wages and promulgated the curve as a tool of economic policy, arguing that the simultaneous achievement of low unemployment and low inflation was problematic. Monetarists, including Milton Friedman, claimed the relationship was not stable. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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Friedman's theories explained why this might sometimes appear to be so but also why in the long term it was not so--and how belief in the Phillips Curve helped cause the stagflation of the 1970s, which perplexed Keynesian economic managers by combining inflation with a lack of economic growth. Feldstein, once considered by many as more likely than Bernanke to be Greenspan's successor at the Fed, was posing the old Phillips Curve formulation that only hard times could slow inflation. We never accepted either the Phillips Curve or the NAIRU. |
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