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A Kind of Neither Keynesian Nor Neoclassical Model (4): The Nature of Philips Curve

DOI: 10.4236/oalib.1103388, PP. 1-14

Subject Areas: Economics

Keywords: Philips Curve, Inflation, Unemployment Rate, Monetary Neutral

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Abstract

Officials always want to use the replacement relationship between the unemployment rate and the price of the Phillips curve to reduce the unemployment rate, but things go crisscross. The reason is that there is no causal relationship between price and unemployment. In this paper, it demonstrates the Phillips curve is derived from the unemployment cycle equation and the inflation equation. And then, it discusses the influence of core variables and fluctuating variables on Phillips curve and the cause of distortion or complete disappearance of Phillips curve. Finally, this paper discusses monetary neutrality and related monetary policy issues. The policy that is conducive to the smooth operation of the system is consistent with the constant money supply of the economic cycle, rather than counter-cyclical regulation.

Cite this paper

Zhan, Z. and Zhan, M. (2017). A Kind of Neither Keynesian Nor Neoclassical Model (4): The Nature of Philips Curve. Open Access Library Journal, 4, e3388. doi: http://dx.doi.org/10.4236/oalib.1103388.

References

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[2]  Friedman, M. (1968) The Role of Monetary Policy. American Economic Review, 58, 1-17.
[3]  Friedman, M. (1977) Nobel Lecture: Inflation and Unemployment. Journal of Political Economy, 85, 451-472.
https://doi.org/10.1086/260579
[4]  Phelps, E. (1967) Phillips Curves, Expectation, and Optimal Inflation over Time. Economica, 135, 254-281.
https://doi.org/10.2307/2552025
[5]  Zhan, M.A. and Zhan, Z. (2016) A Kind of Neither Keynesian Nor Neoclassical Model (2): The Business Cycle. Open Access Library Journal, 3, e3215.
https://doi.org/10.4236/oalib.1103215
[6]  Zhan, M.A. and Zhan, Z. (2017) A Kind of Neither Keynesian Nor Neoclassical Model (3): The Inflation Equation. Open Access Library Journal, 4, e3333.
[7]  Herbert, S. (1994) Presidential Economics: The Making of Economic Policy from Roosevelt to Clinton. 3rd Revised Edition, American Enterprise Institute for Public Policy Research, Washington DC.
[8]  Zhan, M.A. and Zhan, Z. (2016) A Kind of Neither Keynesian Nor Neoclassical Model (1): The Fundamental Equation. Open Access Library Journal, 3, e3207.
https://doi.org/10.4236/oalib.1103207

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