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.
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