Inflation, unemployment, and monetary policy

Author: Solow et al.
Publisher:
Publish Date: 2004-02-01
Features: The relationship between price inflation and real economic activity has been a central focus of macroeconomic research and debate for many centuries. Although this relationship is crucial for understanding what monetary policy can and cannot achieve, opinions on its fundamental nature have been divided for years. Today, virtually every researcher of monetary policy recognizes that, contrary to the implications of many modern macroeconomic models, central bank actions often affect both inflation and indicators of real economic activity, such as output, unemployment, and income. However, the nature and extent of these effects remain poorly understood. Anyone who has studied macroeconomics knows the Phillips curve. The Phillips curve depicts the relationship between inflation and real economic activity (primarily the relationship between inflation and unemployment). This relationship has always been a focal point of debate in macroeconomics. This book brings together several influential figures in Western macroeconomics—both seasoned economists like Galbraith and Solow and up-and-coming economists like Taylor, Mankiw, and Ben Friedman—to present a compelling debate about whether the Phillips curve exists and how monetary authorities should act. This debate not only helps us understand the cutting-edge issues in modern macroeconomics but also provides valuable insights for the current policy practices of China's central bank.