Is There a Stable Relationship between Unemployment and Future Inflation?

Evaluating the stability of the Phillips curve using aggregate data is challenging due to the bias that endogenous monetary policy imparts on estimated Phillips curve coefficients.

Evaluating the stability of the Phillips curve using aggregate data is challenging due to the bias that endogenous monetary policy imparts on estimated Phillips curve coefficients. We argue that regional data can be used to identify the structural relationship between unemployment and inflation. Our analysis, using city- and state-level data from 1977 to 2017, is consistent with the notion that both the reduced-form and the structural parameters of the Phillips curve are, to a substantial degree, quite stable. (JEL E12, E24, E31, E52, E58)