Phillips Curve Calculator
Calculate the Phillips curve relationship between inflation and unemployment. This fundamental macroeconomic concept shows the trade-off between inflation and unemployment in the short run.
Current Economic Data
Phillips Curve Parameters
Phillips Curve Results
Actual Inflation:
0.00%
Expected Inflation:
0.00%
Inflation Gap:
0.00%
Economic Analysis
Unemployment Gap:
0.00%
Policy Stance:
N/A
Economic Pressure:
N/A
Long-Run Phillips Curve
Long-Run Inflation:
0.00%
NAIRU:
0.00%
Equilibrium Status:
N/A
Understanding the Phillips Curve
The Phillips curve illustrates the inverse relationship between inflation and unemployment. It suggests that lower unemployment is associated with higher inflation, and vice versa, creating a trade-off for policymakers.
Phillips Curve Formula
Short-Run Phillips Curve
- p = p? - a(U - U*)
- p = Actual inflation rate
- p? = Expected inflation rate
- U = Actual unemployment rate
- U* = Natural unemployment rate
- a = Phillips curve coefficient
Long-Run Phillips Curve
- p = p? (at U = U*)
- Vertical at natural rate
- No long-run trade-off
- Expectations adjust over time
- Monetary policy neutral
Key Concepts
Understanding the Trade-off
Inflation Expectations
- Adaptive expectations
- Rational expectations
- Central bank credibility
- Inflation targeting
- Forward guidance
Natural Rate of Unemployment
- NAIRU - Non-Accelerating Inflation Rate
- Structural unemployment
- Frictional unemployment
- Time-varying concept
- Policy objective
Phillips Curve Evolution
| Time Period | Phillips Curve Shape | Key Factors | Policy Implications |
|---|---|---|---|
| 1950s-1960s | Stable downward-sloping | Fixed expectations | Clear trade-off available |
| 1970s | Shifted right (stagflation) | Oil shocks, expectations | Trade-off breakdown |
| 1980s-Present | Flatter, vertical in long-run | Rational expectations | Limited short-run trade-off |
Applications in Monetary Policy
Inflation Targeting
- Central bank objectives
- Policy credibility
- Expectation anchoring
- Communication strategy
Dual Mandate
- Price stability
- Maximum employment
- Policy trade-offs
- Output gap analysis
Taylor Rule
- Interest rate setting
- Inflation gap
- Output gap
- Policy rules
Forward Guidance
- Expectation management
- Policy transparency
- Market communication
- Policy effectiveness
Modern Phillips Curve Challenges
Globalization Effects
- Import price pressures
- Supply chain disruptions
- Exchange rate impacts
- Global inflation transmission
Structural Changes
- Demographic shifts
- Technology changes
- Labor market reforms
- Productivity trends
Key Takeaways for Phillips Curve Calculator
- The Phillips curve shows the trade-off between inflation and unemployment
- In the short run, lower unemployment leads to higher inflation
- In the long run, there is no trade-off at the natural rate of unemployment
- Inflation expectations play a crucial role in the relationship
- Central banks use the Phillips curve to guide monetary policy
- The curve has flattened over time due to better policy and expectations
- Supply shocks can cause both high inflation and high unemployment
- Use the calculator to assess inflationary pressures and policy trade-offs