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Volume 53, November/December 2018, Number 6 · pp. 333-336


A Simple Post-Crisis EMU Phillips Curve –Implications for Monetary Policy

Peter Hennecke

The persistently low wage and price growth in the EMU after the Great Recession led some economic observers to conclude that the Phillips Curve has broken down and that the ECB should therefore reconsider its inflation target. This study makes use of the considerable cross-country and cross-time heterogeneity in terms of inflation and capacity utilisation of EMU member states after the Great Recession to investigate whether these claims are corroborated by empirical evidence. The results of this study point to the conclusion that the Phillips Curve is alive and well in the EMU and centred at or only slightly below the ECB’s inflation target. Therefore, a readjustment of the inflation target seems unjustified. Furthermore, as the ECB can expect the inflation to return to its target, it possibly can accelerate tapering its unconventional monetary policy measures as the recovery continues.


This Intereconomics article is available for free at this page after an embargo period of two years. Reading it before December 2020 is possible via SpringerLink or in the next library.