philip的s curve 菲利普斯曲线学习指导.docVIP

Topic four: the shape of the Phillips curve and the conduct of aggregate demand policies Phillips curve is a negative trade-off observed between inflation and unemployment. In the late 1950s, A.W.Phillips plotted the annual rate of growth of nominal wages, or wage inflation, in Britain during the period 1861-1957 against the rate of unemployment and found a remarkably robust negative correlation, which was confirmed for a number of other countries. The explanation is that unemployment represents the degree of labour market tightness, so that the higher the level of unemployment, the smaller will be the increase in the nominal wage (wage inflation). This curve represents a set of possible options from which governments could choose. (A1580 BUR3 p283-286) Nominal wages will induce firms to increase their prices; alternatively, an increase in prices causes labour to ask for compensation in the form of wage increases. Hence, there is a positive relationship between the growth rate of nominal wage rate and the inflation. The response of nominal wages to excess demand was non-linear, and that decreases in unemployment caused successively greater increases in nominal wages. Further, a decrease in employment induces a smaller decline in wages than the increase in wages brought out by a corresponding increase in job vacancies, so that increases in employment in some industries with corresponding decreases in others will bring about a net increase in the average nominal wage rate. Hence, both the level of unemployment and its variance among industries together determined the Phillips curve relationship. (T221 HAN3 p389) Phillips curve was consistent with the economic philosophy of Keynesians that the authorities can manipulate employment and output in the economy and should attempt to do so to achieve better levels than the economy would generate on its own. Okun’s law indicates the inverse relationship between the gap and unemployment. It implies that, when the economy slo