January 3, 2008

Richmond Fed's Economic Quarterly Evaluates How Well a Phillips Curve Accounts for the Changing Nature of Inflation in the United States

Richmond, VA

Evolving Inflation Dynamics and the New Keynesian Phillips Curve

by Andreas Hornstein

The Phillips curve has long been used to represent the tradeoff between inflation and economic activity. However, since the mid-1960s, many theorists have agreed that during periods of persistently high inflation, this model does not hold true. Has the U.S. economy become too complex for this economic model? Richmond Fed economist Andreas Hornstein examines a more contemporary model to determine if it can better reflect the changing nature of inflation in the United States.

You can find the full text of this article and others in the latest issue of Economic Quarterly at the Bank's Web site.

Also in the Fall 2007 issue:

  • The Evolution of City Population Density in the United States by Kevin A. Bryan, Brian D. Minton, and Pierre-Daniel G. Sarte
  • Currency Quality and Changes in the Behavior of Depository Institutions by Hubert P. Janicki, Nashat F. Moin, Andrea L. Waddle, and Alexander L. Wolman
  • Non-Stationarity and Instability in Small Open-Economy Models Even When They Are "Closed" by Thomas A. Lubik

The Economic Quarterly is a free publication containing economic analysis pertinent to Federal Reserve monetary and banking policy. For free copies or more information, contact the Federal Reserve Bank of Richmond's Public Affairs office at 804.697.7982.

The Richmond Fed serves the Fifth Federal Reserve District, which includes the District of Columbia, Maryland, North Carolina, South Carolina, Virginia and most of West Virginia. As part of the nation's central bank, we're one of 12 regional Reserve Banks that work together with the Federal Reserve's Board of Governors to strengthen the economy and our communities. We manage the nation's money supply to keep inflation low and help the economy grow. We also supervise and regulate financial institutions to help safeguard our nation's financial system and protect the integrity and efficiency of our payments system.


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