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The Recent Steepening of Phillips Curves

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Abstract

The Phillips curve captures the empirical inverse relationship between the level of inflation and unemployment. The reciprocal of its slope, sometimes referred to as the “sacrifice ratio,” represents the increase in the unemployment rate associated with a 1 percentage point reduction in the inflation rate. In this Chicago Fed Letter, we provide evidence that the Phillips curve has steepened in many industrialized countries since the start of the recovery from the Covid-19 pandemic. This suggests a lower sacrifice ratio now than before 2020.

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  • Bart Hobijn & Russell Miles & James Royal & Jing Zhang, 2023. "The Recent Steepening of Phillips Curves," Chicago Fed Letter, Federal Reserve Bank of Chicago, vol. 0, January.
    • Handle: RePEc:fip:fedhle:95642
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    File URL: https://www.chicagofed.org/publications/chicago-fed-letter/2023/475
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    Keywords

    macroeconomics; monetary economics;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • F01 - International Economics - - General - - - Global Outlook

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