Two routes back to the old Phillips curve

The Phillips curve posits a trade-off between inflation and unemployment and has long served as the workhorse model of inflation for most economists and Central Banks. Although the conceptual foundations of this relationship have been a subject of debate, the relationship seemed well-supported by the data for many decades. However, since the 1960s, the slope of the curve (a measure of the responsiveness of inflation to a decline in labor market slack) has diminished significantly.

Despite the flattening of the Phillips curve, Blanchard has recently argued that it is still "alive and well." According to Summa and Braga (2020), there are "two routes" to this old Phillips curve: the mainstream route and the conflict-augmented alternative.

In this Webinar, we will have a conversation with the authors about these two alternatives:
i) the amended mainstream, which considers demand-pull inflation and full incorporation of inflation expectations into money wages and;
ii) an alternative non-neoclassical conflict-augmented Phillips curve that assumes no labor scarcity, cost-push inflation, and expectations that are not always fully passed on to nominal wages.

The full paper can be found here: https://serialsjournals.com/abstract/42980_4-summa.pdf

About the authors:

Ricardo Summa is professor of Economics at the Federal University of Rio de Janeiro, Research Fellow at the National Council for scientific and Technological Development (CNPq) and Associate Editor of the Review of Keynesian Economics.

Julia Braga is Associate Professor at the Faculty of Economics at Federal Fluminense University (UFF)