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Title: UK Phillips Curves and Monetary Policy

Author(s): Andrew Haldane and Danny Quah

Publication Date: November 1999

Keyword(s): Beliefs, Inflation, Natural Rate Hypothesis and Stability

Programme Area(s): International Macroeconomics

Abstract: 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 - how policy-maker attitudes on the Phillips curve have evolved since the 1950s - 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 favourable 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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Bibliographic Reference

Haldane, A and Quah, D. 1999. 'UK Phillips Curves and Monetary Policy'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2292