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Created: 2001-03-15
Last Modified: 20
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The Shift in the Phillips Curve

What inflation has done in the 1990s compared to what it would have done had the pre-1993 pattern continued

J. Bradford DeLong

March 2001

Source: Author's calculations.

  • By how much has the Phillips curve--the relationship between inflation and unemployment--changed in the 1990s? A lot
  • The figure above compares actual inflation to what inflation would have been had it had the same relationship to unemployment as before 1993.
  • If there had not been a structural break in the relationship, inflation would now--in 2001--be nearly 5.5% per year and climbing.
  • The post-1995 divergence of inflation from predictions based on pre-1993 models closely tracks the acceleration of productivity growth in the 1990s.

Professor of Economics J. Bradford DeLong, 601 Evans Hall, #3880
University of California at Berkeley
Berkeley, CA 94720-3880
(510) 643-4027 phone (510) 642-6615 fax

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