TY - JOUR
T1 - The Phillips multiplier
AU - Barnichon, Regis
AU - Mesters, Geert
PY - 2021/1
Y1 - 2021/1
N2 - The Phillips multiplier is a statistic to non-parametrically characterize the central bank inflation-unemployment trade-off. Inference on the Phillips multiplier is based on a simple instrumental variable regression of cumulative inflation on cumulative unemployment using monetary shocks as instruments. We compute the Phillips multiplier for the US and the UK and document that the trade-off went from being large in the pre-1990 sample period to being small (but significant) post-1990. In contrast to earlier evidence of a flattening of the slope of Phillips curve, the decline in the trade-off is mostly due to the anchoring of inflation expectations.
AB - The Phillips multiplier is a statistic to non-parametrically characterize the central bank inflation-unemployment trade-off. Inference on the Phillips multiplier is based on a simple instrumental variable regression of cumulative inflation on cumulative unemployment using monetary shocks as instruments. We compute the Phillips multiplier for the US and the UK and document that the trade-off went from being large in the pre-1990 sample period to being small (but significant) post-1990. In contrast to earlier evidence of a flattening of the slope of Phillips curve, the decline in the trade-off is mostly due to the anchoring of inflation expectations.
KW - Dynamic multiplier
KW - Inflation-Unemployment trade-off
KW - Instrumental variables
KW - Phillips curve
KW - Weak-instrument robust methods
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U2 - 10.1016/j.jmoneco.2020.04.005
DO - 10.1016/j.jmoneco.2020.04.005
M3 - Article
AN - SCOPUS:85083435589
SN - 0304-3932
VL - 117
SP - 689
EP - 705
JO - Journal of Monetary Economics
JF - Journal of Monetary Economics
ER -
