‘Modern’ Phillips curves and the implications for the statistical process of inflation

ABSTRACT

‘Modern’ theories of the Phillips curve imply that inflation is an integrated, or near integrated’ process. This article explains this implication and why these ‘modern’ theories are logically inconsistent with what is commonly known about the statistical process of inflation.

KEYWORDS:

• Phillips curve
• inflation
• stationary
• integrated
• macroeconomics

JEL CLASSIFICATION:

• C10
• C20
• E31

Acknowledgement

I would like to thank Adrian Pagan for the lengthy correspondence carried out between October 2013 and June 2014 that this article draws heavily from.

Disclosure statement

No potential conflict of interest was reported by the author.