Is There a Relationship between Inflation and Unemployment? — Menzie Chinn

While the equation fits relatively well, clearly it’s not perfect. As of 2019Q2 (first two months), year-on-year PCE inflation is underpredicted by 40 bps. I estimated the equation on a restricted sample ending in 2014; this imparts only a marginal difference — so it’s not that something has changed substantially over the last 4 and a half years. Rather the specification could be improved.

In other words, perhaps a different measure of NAIRU, or a nonlinearity might improve the fit. However, these specification or measurement errors do not invalidate the concept of the Phillips curve. More graphs (from my undergrad course), using the output gap, here.

For more on a cross country basis, see a recent working paper by Blanchard, Cerutti, and Summers (2015). They show that the slope of the Phillips curve has dropped around the early 1990’s; those who rely upon very old stylized facts might be excused for thinking the Phillips curve had gone AWOL.

Econbrowser
Is There a Relationship between Inflation and Unemployment?
Menzie Chinn | Professor of Public Affairs and Economics, Robert M. La Follette School of Public Affairs, University of Wisconsin–Madison, co-editor of the Journal of International Money and Finance, and a Research Associate of the National Bureau of Economic Research International Finance and Macroeconomics

See also

Information Transfer Economics
The Phillips Curve: An Overview
Jason Smith