Forum Archive Index - February 2004

[mixtrader <mixtrader@clear.net.nz>]

Winner 69

Phillips curve has been shown to be accurate in recent years ONLY in
short-term analysis.  All analysis (on a global basis) has shown that the
Phillips relationship falls apart when viewed over the longer-term - the
curve wanders about aimlessly as you put it.

Economists still use the knowledge of the Phillips relationship when
assessing the impact of macro-economic policies.  If a government does
anything that will increase inflation there will be a short-term drop in
unemployment and vice-versa.  While it is acknowledged that this is a
short-term effect, the "short-term" could be years rather than months.

The current situation in NZ makes a mockery of the Phillips trade-off
between inflation and unemployment - our inflation rate is low and
unemployment is at low levels, possibly approaching the natural rate of
unemployment in some regions.


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