Krugman Is Right! The Phillips Phlat-Line Is Alive And Well!

A Benjamin Cole post

The acerbic, brilliant Nobel Prize-winner Paul Krugman is too Keynesian for me, but give credit when credit is due. The Phillips Curve is alive and well, except that it has become the Phillips Phlat-line, as Krugman recently illustrated in his blog.

Krugman produced this chart, which is good:

Cole_1

But better still is this chart by Tim Duy:

Cole_2

Krugman put some fancy regression co-efficients on his chart, but I say eyeballing is better—this is macroeconomics after all, and pretensions to exactitude are folly.

It sure looks to me like the Phillips Phlat-Line is alive and well, meaning the Fed has a lot of room for additional monetary stimulus. You have to boost unemployment by 5 pp to get a 1 pp cut in inflation rates. Who likes that deal (besides Charles Plosser and Richard Fisher)?

In English: Gun the money press, dudes.

That is, if we can bear 2% inflation and prosperity.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s