during the Great Moderation, 1992–2005, when everything macroeconomic seemed to remain stable. Thus the fact that the slope of the calculated relationship between unemployment (or the output gap) and wage (price) inflation appeared to become more horizontal in these later decades may be just an artefact of better monetary policies and fewer supply shocks, rather than representing any change to the underlying structural relationship. If this was so, then calculations of Phillips curve relationships for separate segments of a single monetary area, e.g. where monetary policy could not offset
...more
