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Return of the Original Phillips Curve

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Abstract

The link between changes in U.S. inflation and the output gap has weakened in recent decades. Over the same time, a positive link between the level of inflation and the output gap has emerged, reminiscent of the original 1958 version of the Phillips curve. This development is important because it indicates that structural changes in the economy have not eliminated the inflationary pressure of gap variables. Improved anchoring of people’s expectations for inflation, which makes the expected inflation term in the Phillips curve more stable, can account for both observations.

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  • Peter Lihn Jørgensen & Kevin J. Lansing, 2021. "Return of the Original Phillips Curve," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, vol. 2021(21), pages 01-06, August.
    • Handle: RePEc:fip:fedfel:92954
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    1. Olivier Blanchard, 2016. "The Phillips Curve: Back to the '60s?," American Economic Review, American Economic Association, vol. 106(5), pages 31-34, May.
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    1. Jørgensen, Peter Lihn & Lansing, Kevin J., 2025. "Anchored inflation expectations and the slope of the Phillips curve," European Economic Review, Elsevier, vol. 178(C).

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