The Phillips curve has played a central role in both theoretical and empirical analyses for almost 70 years, since A. W. Phillips first reported an inverse relationship between changes in wages and the unemployment rate, leading to a revolution both in policy making and in the development of theoretical links between the real and nominal macroeconomic variables. This policy brief explores in more detail the enduring importance of the Phillips curve relationship and the challenges central bankers face in convincing the public that following this line of thought promotes best practice. The brief concludes with some recommendations concerning the usefulness of the Phillips curve as a paradigm for communicating monetary policy actions.
