Transcription of The Slope of the Phillips Curve: Evidence from U.S. States
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The Slope of the Phillips Curve: Evidence from U.S. States
THEQUARTERLY JOURNALOF ECONOMICSVol. 1372022 Issue 3 THE Slope OF THE Phillips CURVE: Evidence States JONATHONHAZELLJUANHERRE NOEMINAKAMURAJ ONSTEINSSONWe estimate the Slope of the Phillips curve in the cross section of statesusing newly constructed state-level price indices for nontradeable goods back to1978. Our estimates indicate that the Slope of the Phillips curve is small andwas small even during the early 1980s. We estimate only a modest decline in theslope of the Phillips curve since the 1980s. We use a multiregion model to inferthe Slope of the aggregate Phillips curve from our regional estimates. Applyingour estimates to recent unemployment dynamics yields essentially no missingdisinflation or missing reinflation over the past few business cycles. Our resultsimply that the sharp drop in core inflation in the early 1980s was mostly due toshifting expectations about long-run monetary policy as opposed to a steep Phillipscurve, and the greater stability of inflation between 1990 and 2020 is mostly dueto long-run inflation expectations becoming more firmly Codes:E30.
slope of the Phillips curve also face the classic simultaneity problem of distinguishing demand shocks from supply shocks. Supply shocks (un t and t) yield positive comovement of inflation and unemployment (stagflation). If the variation used to identify the slope of the Phillips curve is
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