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Social Sciences
Economics
1958
Intermediate

Phillips Curve

π=πe+β(u∗−u)+ϵ\pi = \pi_e + \beta(u^* - u) + \epsilon

Inflation tends to rise when unemployment falls below the natural rate.

By A.W. Phillips

Social Sciences
Phillips Curve
1958 · A.W. Phillips
Why it matters: Shaped decades of monetary policy trade-offs between inflation and jobs.

Discoverers: A.W. Phillips (1958)

What does it mean?

Inflation tends to rise when unemployment falls below the natural rate.

Why should I care?

Shaped decades of monetary policy trade-offs between inflation and jobs.

Variables & Units

SymbolNameUnitMeaning
ππInflation—Rate
πeπ_eExpected inflation—Rate
uuUnemployment—Rate
u∗u*Natural rate—NAIRU

Worked Example

Tight labor market (low u) pushes π above π_e.

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Sources & further reading

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Equation Universe

Phillips Curve

π=πe+β(u∗−u)+ϵ\pi = \pi_e + \beta(u^* - u) + \epsilon

Real-world impact

Global economy

Quantitative models shape markets and policy.

Photo: Unsplash — financial markets

Inflation tends to rise when unemployment falls below the natural rate.

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