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May 23, 2022

phillips curve

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In figure 5-4(c) the celebrated Phillips curve is depicted. Review the data set for this week’s Problem set, which extends the data into future years: you will notice that there is no longer a simple relation between inflation and unemployment. You can see visually what is happening in this animation from Carnegie Mellon University (Links to an external site.). It turns out that the simple Phillips Curve has omitted an important variable. One good discussion of what is happening is Topic 5. The Phillips Curve (Links to an external site.). Based upon your research, discuss how an economist might discover that a variable may be missing and how an economist might determine what variable that may be? What variable to believe this to be and why?

https://www.economics.utoronto.ca/jfloyd/modules/phlc.html

https://www.andrew.cmu.edu/course/88-301/phillips/phillips_curve.gif

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