The Phillips curve and the inflation dynamics

In this paper we examine the appropriateness of the adoption of the Phillips curve in order to predict changes in the inflation process. We proceed by modelling the Phillips curve framework adopting three different specifications. Our results provide evidence of the presence of a stable Phillips curve in the United States over a long period of time. In particular, all the three models adopted highlight an overall good dynamic tracking performance of the relative estimated Phillips curve in capturing the actual changes in the value of inflation. The underlying implications point out however that the Phillips curve slope has flatten over the time, resulting in a less sensitive inflation to labor market tensions. Moreover, our findings also suggests a situation where a more stable conduction of monetary policy pursued by the Federal Reserve in order to affect the future pattern of the level of inflation accentuates even more the flattening of the slope of the respective estimated Phillips curve.