The Phillips multiplier

Regis Barnichon; Geert Mesters

doi:10.1016/j.jmoneco.2020.04.005

The Phillips multiplier

Regis Barnichon^*
, Geert Mesters

^*Corresponding author for this work

Econometrics and Data Science

Research output: Contribution to Journal › Article › Academic › peer-review

Abstract

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.

Original language	English
Pages (from-to)	689-705
Number of pages	17
Journal	Journal of Monetary Economics
Volume	117
Early online date	15 Apr 2020
DOIs	https://doi.org/10.1016/j.jmoneco.2020.04.005
Publication status	Published - Jan 2021

Funding

We thank Sienna Cheng, Oscar Jorda, Sylvain Leduc, Nicolas Petrosky-Nadeau, Frank Schorfheide, Adam Shapiro, Jim Stock, Paolo Surico, Mark Watson, Dan Wilson and participants at the 2018 Annual SNDE Symposium, the 2018 IAAE Annual Meeting, the 2018 NBER Summer Institute, and the CEPR ?Low Inflation and Wage Dynamics? conference at Banca Italia for helpful comments. The views expressed in this paper are the sole responsibility of the authors and to not necessarily reflect the views of the Federal Reserve Bank of San Francisco or the Federal Reserve System. Mesters acknowledge support from the Spanish Ministry of Science and Technology: Grant ECO2015-68136-P, Marie Sklodowska-Curie Actions: FP7-PEOPLE-2012-COFUND Action grant agreement no: 600387, the Spanish Ministry of Economy and Competitiveness through the Severo Ochoa Programme for Centres of Excellence in R&D (SEV-2015-0563) and Fundacin BBVA scientific research grant (PR16-DAT-0043) on Analysis of Big Data in Economics and Empirical Applications.

Funders	Funder number
Oscar Jorda
European Commission
Sienna Cheng
Seventh Framework Programme	600387
Ministerio de Ciencia y Tecnología	ECO2015-68136-P
Ministerio de Economía y Competitividad	SEV-2015-0563
Fundación BBVA	PR16-DAT-0043

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 17 Partnerships for the Goals

Keywords

Dynamic multiplier
Inflation-Unemployment trade-off
Instrumental variables
Phillips curve
Weak-instrument robust methods

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10.1016/j.jmoneco.2020.04.005

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ER -

The Phillips multiplier

Abstract

Funding

UN SDGs

Keywords

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