Phillips Curve Calculator

Finance

Phillips Curve Calculator estimates the relationship between unemployment rate and inflation. Formula: Inflation% ≈ a - b(unemployment%) or using expectations-augmented model.

Formula

Inflation = a - b(unemployment), where a, b are empirically estimated parameters
  • Negative slope: lower unemployment → higher inflation
  • Empirical parameters vary by country and time period
  • Relationship weakened since 1970s stagflation

Example

Inputs
  • Unemployment Rate (%): 4
  • Intercept Parameter (a): 5
  • Slope Parameter (b): 0.5

At 4% unemployment: Inflation = 5 - 0.5(4) = 3% inflation

Frequently asked questions

What is Phillips Curve?
Empirical relationship showing inverse tradeoff between unemployment and inflation rates
Why use Phillips Curve?
Central banks use it to forecast inflation and design monetary policy