Citation

Discussion Paper Details

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Title: The Phillips Multiplier

Author(s): R�gis Barnichon and Geert Mesters

Publication Date: January 2019

Keyword(s): Dynamic Multiplier, Inflation-Unemployment trade-off, instrumental variables, Marginal Rate of Transformation and Phillips curve

Programme Area(s): Monetary Economics and Fluctuations

Abstract: We propose a model-free approach for determining the inflation-unemployment trade-off faced by a central bank, i.e., the ability of a central bank to transform unemployment into inflation (and vice versa) via its interest rate policy. We introduce the Phillips multiplier as a statistic to non-parametrically characterize the trade-off and its dynamic nature. We compute the Phillips multiplier for the US, UK and Canada and document that the trade-off went from being very large in the pre-1990 sample period to being small (but significant) post-1990 with the onset of inflation targeting and the anchoring of inflation expectations.

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Bibliographic Reference

Barnichon, R and Mesters, G. 2019. 'The Phillips Multiplier'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13480