5/24/11

The Phillips curve and anti-Phillips curve in the U.K.

Looking at two pictures below, please decide which is closer to reality. I have found  a version of the Phillips curve for the U.K. in this paper - "What Drives Inflation in the Major OECD Economies?" by
Diego Moccero, Shingo Watanabe, Boris Cournède. To my mind, their presentation is misleading if compared to the anti-Phillips curve where unemployment lags behind inflation.

Their figure:
My figure: 


I do not understand what makes economists to have so strong prejudice against inflation leading unemployment when it is really  observed. Smells as a sect.

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1 comment:

  1. AnonymousSeptember 19, 2014 at 10:37 AM

    The puzzle may have an innocent resolution. A demand surge first causes an inventory run-down, then an increase in output (more overtime). Only late in the process does inflation respond and hirings occur (unemployment fall). Inflation and unemployment are lagging indicators of a business cycle, and it's plausible that measured unemployment is the last to be affected.

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