Reappraisal of the Phillips Curve and Direct Effects of Money Supply on Inflation
Reappraisal of the Phillips Curve and Direct Effects of Money Supply on Inflation
This chapter provides some evidence on two closely related issues. The first is the question of how well or how badly a typical non-monetarist econometric structure can account for the dynamic pattern of wages and prices in the United States from the 1960s to the 1980s. The second is whether an econometric structure such as this can be successful in fully capturing the effects of the quantity of money on movements of the price level. This second issue is in turn closely related to the question of whether a significant increase in the money supply, regardless of other conditions such as the level of the unemployment rate, is inflationary. The chapter first attempts to exhibit the stability of these empirical relationships and their ability to predict movements of prices and wages during the period in question.
Keywords: econometric structure, wages, prices, United States, money supply, inflation, Phillips curve
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