J. Bradford DeLong
In the 1960s inflation and unemployment in the United States moved back and forth along a stable, favorably-located short-run Phillips curve. At the end of the 1960s, however, the Phillips curve broke down: loss of confidence in the Federal Reserve's commitment to fighting inflation and the oil shock of 1973 led to a steep increase in expected inflation.
In the late 1970s and early 1980s the U.S. economy moved back and forth along a much less favorably-located short-run Phillips curve than in the 1960s.
By 1986 most of the increase in expected inflation since the 1960s had been reversed, and the economy's levels of inflation and unemployment once again moved along a relatively favorably-located short-run Phillps curve.
|Inflation 1960-Present Unemployment 1960-Present Phillips Curve Growth and Fluctuations, 1980-1998 Long-Run Growth|
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