Phillips Curve

A page by Logan Allen

Summary

The Phillips curve was created by William Phillips as a part of a study on the economy of the United Kingdom.


Essentially, the Phillips curve describes the short term relationship between inflation and unemployment. When inflation is high, unemployment will be low, and similarly, when inflation is low, unemployment will be high.


However, this relationship does not always hold true, as in the 1970s when stagflation was prevalent, and unemployment rates were high while inflation was also very high. Around this same time, economists realized that the Phillips curve was too simplistic, and that there was not a strictly inverse relationship between unemployment and inflation.

Graphs of the Phillips Curve

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Phillips Curve