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Inflation Expectations and the Phillips Curve: Then and Now

In: Expectations

Author

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  • Harald Hagemann

    (University of Hohenheim)

Abstract

The Phillips curve has been in the focus of many key debates in macroeconomics ever since Samuelson and Solow (1960) modified the original curve in linking the unemployment rate to the inflation rate. This essay analyzes the links of the modern discussion to the debates over time highlighting similarities, differences, and ways ahead regarding the formation of inflation expectations. Whereas Sect. 2 gives a rational reconstruction from static via extrapolative and adaptive to rational expectations, the historical reconstruction in Sect. 3 challenges widespread fictitious stories that there exists a one-way avenue of progress in the sophistication of expectations. In the concluding section, some relevant issues of the current debates are addressed as the anchoring of inflation expectations as a precondition for keeping inflation targets and the question whose expectations are most relevant for wage and price setting.

Suggested Citation

  • Harald Hagemann, 2020. "Inflation Expectations and the Phillips Curve: Then and Now," Springer Studies in the History of Economic Thought, in: Arie Arnon & Warren Young & Karine van der Beek (ed.), Expectations, pages 131-144, Springer.
    • Handle: RePEc:spr:spshcp:978-3-030-41357-6_8
    DOI: 10.1007/978-3-030-41357-6_8
    as

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