The (conflict-augmented) Phillips Curve is alive and well

Blanchard recently stated that the old Phillips curve - a relation between the level of inflation and the level of the unemployment rate - is alive and well. In this paper we will argue that there are two routes to this old Phillips curve. We will compare and contrast them. The mainstream route assumes demand-pull inflation and full incorporation of inflation expectations into money wage increases, leading to an accelerationist behavior of inflation. Followers of this approach propose amendments to avoid this accelerationist relation between demand shocks and inflation without discarding the two crucial assumptions, based on introducing imperfections and anchored expectations. After a critical evaluation of these amendments in the accelerationist curve, we will argue in favor of an alternative route to the old Phillips curve that rejects any neoclassical assumptions. This alternative approach assumes that there is no labour scarcity and that inflation depends on conflicting claims over income. Therefore, expectations are not necessarily always fully passed on to nominal wages. Our general conflict-augmented Phillips curve is different from the conflicting-claims Heterodox NAIRU models as it is compatible both with the old Phillips curve but also with accelerating inflation, depending on the bargaining power of the workers.