July 8, 2017

Laying the bastard Phillips curve to rest

Comment on Nick Rowe on ‘Never mind the flatness, feel the length (of the observed Phillips Curve)’


When you have cognitive dissonances with the Phillips curve it is NOT your fault but rather a sure sign of mental health. The Phillips curve is misspecified since Samuelson/Solow. To make matters short the elementary version of the correct structural Phillips curve is shown on Wikimedia.#1 The structural Phillips curve consists alone of measurable variables and is therefore identical with what you call the observed Phillips curve.

For the derivation see Sections 5 to 7 of the working paper ‘Keynes’s Employment Function and the Gratuitous Phillips Curve Disaster’.#2

Egmont Kakarot-Handtke

#1 Wikimedia
Structural Phillips curve

Related 'Rethinking the Phillips curve'