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UK Philips curves and monetary policy

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This paper documents some stylized facts on evolving UK Phillips curves, and shows how these differ from their US versions. We interpret UK Phillips curve dynamics in a positive theory of monetary policy û how policy-maker attitudes on the Phillips curve have evolved since the 1950s û rather than, more traditionally, as interaction between exogenous demand and supply disturbances. Combining this framework with reasoned conjectures on how policy-makers'' beliefs have changed helps explain some features of the evolving UK Phillips curve. We suggest that correlations suggesting an extreme favorable unemployment-inflation tradeoff might indicate not something to be exploited but instead only policy-makers'' correctly acknowledging that no tradeoff exists.

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en

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http://eprints.lse.ac.uk/20205/

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