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Phillips Meets Beveridge

In: Inflation in the COVID Era and Beyond

Author

Listed:
  • Régis Barnichon
  • Adam Shapiro

Abstract

The Phillips curve plays a central role in the macroeconomics literature. However, there is little consensus on the forcing variable that drives inflation in the model, i.e., on the appropriate measure of “slack” in the economy. In this work, we systematically assess the ability of variables commonly used in the literature to (i) predict and (ii) explain inflation fluctuations over time and across U.S. metropolitan areas. In particular, we exploit a newly constructed panel dataset with job openings and vacancy filling cost proxies covering 1982-2022. We find that the vacancy-unemployment (V/U) ratio and vacancy filling cost proxies outperform other slack measures, in particular the unemployment rate. Beveridge curve shifts—notably, movements in matching efficiency—are responsible for the superior performance of the V/U ratio over unemployment.
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Suggested Citation

  • Régis Barnichon & Adam Shapiro, 2024. "Phillips Meets Beveridge," NBER Chapters, in: Inflation in the COVID Era and Beyond, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:15085
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    More about this item

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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