Dynamic Monetary Theory and the Phillips Curve with a Positive Slope

29 Pages Posted: 10 Mar 2013

Date Written: November 21, 2012


Don Bellante and Roger W. Garrison (1988) compared two alternative approaches to monetary dynamics: those based on a vertical long-run Phillips Curve and those derived from analysis of Hayekian triangles. The conclusion the authors reached is that the only factor differentiating the two models is the "process" whereby the initial cause is converted into the final "neutral" effect. This article refutes that conclusion. To do so it suffices to demonstrate that the long-term effect of monetary policy is never neutral. While it is true that after the boom-bust cycle the economy returns to the natural rate of unemployment, the crucial point is that the "natural rate" at the end of the cycle is quite different from the one evident at the start. This requires an Austrian Phillips Curve with a positive slope.

Keywords: Monetary Dynamics, Phillips Curve, Unemployment, Business Cycle

JEL Classification: B25, E24, E32, E58, N12

Suggested Citation

Ravier, Adrian O., Dynamic Monetary Theory and the Phillips Curve with a Positive Slope (November 21, 2012). Available at SSRN: https://ssrn.com/abstract=2230461 or http://dx.doi.org/10.2139/ssrn.2230461

Adrian O. Ravier (Contact Author)

Universidad Francisco Marroquín ( email )

Escuela de Negocios
Calle Manuel F. Ayau (6 Calle final), zona 10
Guatemala, 01010

HOME PAGE: http://www.adrianravier.com

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