The Phillips multiplier and the two sides of inflation
Abstract
The inflation-unemployment trade-off faced by a central bank can be characterised non-parametrically by the Phillips multiplier of Barnichon and Mesters (2021). Because the multiplier is linear in inflation, it inherits any exact decomposition of it. We split it into the two directional margins of price adjustment of Quineche and Zapata (2026). Before 1990, a policy-induced one-percentage-point rise in the cumulative unemployment gap raises cumulative deflationary pressure by 0.4pp: the identified trade-off runs through price cuts. After 1990, excluding the zero lower bound, nothing is identified: neither the multiplier nor either margin. The instruments carry too little exogenous variation.
Fields of Study & Subjects
Economic Theory and Policy
Monetary Policy and Economic Impact
Unemployment and Economic Growth
Publication details
- Journal / source
- Economics Letters
- Publisher
- Elsevier BV
- Volume
- 268
- Pages
- 113192–113192
- Publication date
- 17 August 2026
- Language
- EN