The “mythical” Phillips curve or the “tangible” NGDP

Simon Wren-Lewis has a post “The Mythical Phillips Curve?”:

Suppose you had just an hour to teach the basics of macroeconomics, what relationship would you be sure to include? My answer would be the Phillips curve. With the Phillips curve you can go a long way to understanding what monetary policy is all about.

I think you get more “mileage” by using NGDP instead.

The panel shows NGDP (a Fed-controlled quantity) and the “rest” (Inflation, RGDP and Unemployment).


The overall picture the student gets is much clearer than the one he gets from looking at “Phillips-Curve” charts for the same periods, as shown by SWL (an example of which below).

PC or NGDP_1


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