The Modern Phillips Curve Revisited ()
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ABSTRACT
The modern Phillips curve is about the relationship between the average rates of inflation and unemployment. We will provide additional empirical evidence in the US economy from 1948:01 to 2013:03 that helps demonstrate why such a relationship has been built on a wrong methodology, as revealed in Ma [1]. An erroneous approach can lead to a misunderstanding of business cycles and a wrongful implementation of monetary policy. In particular, the way how the two rates may evolve is now at a critical moment for the Fed to decide if an exit from its quantitative easing should be initiated.
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