The Enigma of the Phillips Curve: Unraveling the Inflation-Unemployment Paradox

Introduction

The relationship between inflation and unemployment is one of the most enduring and debated concepts in macroeconomics. At the heart of this discussion lies the Phillips Curve, a model that suggests a stable, inverse relationship between these two key economic indicators. This course delves deep into the theoretical underpinnings and practical applications of this curve, exploring how this trade-off has evolved over decades of economic policy and global shocks. We will move beyond the basic textbook definition to examine its modern iterations, including the role of expectations, supply shocks, and the long-run implications for policy. By the end of this training, you will be equipped to analyze real-world economic data and contribute to informed discussions on monetary policy, employment strategies, and the delicate balance of a healthy economy.

Course Details

  • Duration: 10 days
  • Target Audience:
    • Economists and financial analysts
    • Central bank officials and policymakers
    • Students of economics and finance
    • Business strategists and executives
    • Journalists specializing in economic reporting
    • Academics and researchers

Learning Objectives

Upon completion of this course, you will be able to:

  1. Explain the original Phillips Curve and its historical context.
  2. Analyze the short-run and long-run Phillips Curve.
  3. Evaluate the role of inflation expectations in shifting the curve.
  4. Differentiate between the New Keynesian and Classical interpretations.
  5. Assess the impact of supply shocks on the inflation-unemployment trade-off.
  6. Critique the validity of the Phillips Curve in the 21st century.
  7. Apply the Phillips Curve concept to real-world policy decisions.
  8. Understand the concept of the Non-Accelerating Inflation Rate of Unemployment (NAIRU).
  9. Forecast inflationary pressures based on unemployment data.
  10. Debate the effectiveness of using the Phillips Curve as a policy tool.

Course Modules

Module 1: The Historical Roots of the Phillips Curve

  • A.W. Phillips' original 1958 findings
  • The statistical relationship and its limitations
  • Early policy applications in the 1960s
  • The concept of the stable trade-off
  • Initial critiques and extensions

Module 2: The Short-Run and Long-Run Phillips Curve

  • Defining the short-run trade-off
  • The role of adaptive and rational expectations
  • Monetary policy and shifts in the curve
  • The vertical long-run Phillips Curve
  • The natural rate of unemployment hypothesis

Module 3: The Great Inflation of the 1970s

  • The breakdown of the stable trade-off
  • Supply shocks and oil crises
  • Stagflation and its economic paradox
  • Milton Friedman's critique and predictions
  • The end of the simple Phillips Curve

Module 4: The NAIRU and the Long-Run

  • Defining the Non-Accelerating Inflation Rate of Unemployment
  • Estimating and measuring the NAIRU
  • Policy implications of the NAIRU
  • Debates on whether the NAIRU is stable
  • The relationship between NAIRU and potential GDP

Module 5: Rational Expectations and the New Classical View

  • The concept of rational expectations
  • Thomas Sargent and Robert Lucas's work
  • Policy ineffectiveness proposition
  • The Lucas Critique of macroeconomic models
  • Implications for monetary policy credibility

Module 6: The New Keynesian Phillips Curve (NKPC)

  • The foundation of the forward-looking NKPC
  • Sticky prices and nominal rigidities
  • The role of marginal cost
  • Comparing the NKPC to the traditional curve
  • Empirical evidence and modern debates

Module 7: Supply Shocks and Their Impact

  • Differentiating between demand and supply shocks
  • The effect of global supply chains
  • Energy and commodity price fluctuations
  • The role of technological change
  • Recent examples from the 2020s

Module 8: The Phillips Curve and Central Banking

  • Using the Phillips Curve in monetary policy models
  • Inflation targeting frameworks
  • The dual mandate of central banks (employment and price stability)
  • The challenge of a flat Phillips Curve
  • Forward guidance and expectations management

Module 9: Labor Market Dynamics

  • The structure of modern labor markets
  • The gig economy and its effect on wage data
  • Labor market slack and unemployment measures
  • The importance of wage growth in inflation
  • Phillips Curve and labor market reforms

Module 10: The International Dimension

  • The global Phillips Curve
  • Exchange rates and imported inflation
  • Trade liberalization and its effects
  • The role of global supply chains in domestic inflation
  • International policy coordination

Module 11: The Phillips Curve and Asset Prices

  • The relationship between inflation and asset bubbles
  • Monetary policy's effect on asset markets
  • The "wealth effect" and consumption
  • How financial markets price in inflation expectations
  • The role of central banks in managing financial stability

Module 12: Behavioral Economics of Expectations

  • How inflation expectations are formed
  • The role of media and public perception
  • Cognitive biases in economic decision-making
  • The psychology of hyperinflation
  • Communicating inflation to the public

Module 13: Policy Debates and Modern Challenges

  • Is the Phillips Curve dead?
  • The "missing inflation" puzzle
  • The rise of disinflationary forces
  • The potential for a return of high inflation
  • The future of the inflation-unemployment trade-off

Module 14: Practical Applications and Data Analysis

  • Using macroeconomic data to plot the Phillips Curve
  • Analyzing historical shifts and trends
  • Case studies of different countries
  • Forecasting exercises using real data
  • Critiques of the model's predictive power

CERTIFICATION

  • Upon successful completion of this training, participants will be issued with Macskills Training and Development Institute Certificate

TRAINING VENUE

  • Training will be held at Macskills Training Centre. We also tailor make the training upon request at different locations across the world.

AIRPORT PICK UP AND ACCOMMODATION

  • Airport Pick Up is provided by the institute. Accommodation is arranged upon request

TERMS OF PAYMENT

Payment should be made to Macskills Development Institute bank account before the start of the training and receipts sent to info@macskillsdevelopment.com

For More Details call: +254-114-087-180

 

 

The Enigma Of The Phillips Curve: Unraveling The Inflation-unemployment Paradox in Kenya
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