NC State Ag Economist Dr. Mike Walden – “The Missing Phillips Curve”


Mary:  This is Mary Walden with economist MW, welcoming you to the economic perspective.  Today’s program looks at the missing Phillips Curve.  Mike, you know I love a good mystery, and you may have one for me today.  Apparently the Phillips Curve is missing.  Just what is the Phillips Curve, and why is it gone?

Mike: Summary Answer

  1. Phillips curve – in short run, inverse relationship between unemployment rate and inflation rate
  2. But not seeing it today – indeed, in recent months as unemployment rate has dropped, so too has the inflation rate
  3. So economists have been scratching their heads – what’s happened
  4. Several potential answers
  5. Still there – but observed inflation rate is being held back by one-time price drops in technology and energy prices
  6. Or, inflation rate is just lingering – will take off soon
  7. Third potential reason – Phillips curve is dead because we are in a worldwide economy, with prices (and inflation) determined by worldwide conditions
  8. I’m MW

Mary:  And I’m Mary Walden for the North Carolina Cooperative Extension Service