The Great Inflation: Inflation, Inflationary Expectations, and the Phillips Cycle 1960-2002
The Graph of the Week is a figure from the article The Great Inflation: Inflation, Inflationary Expectations, and the Phillips Cycle 1960-2002 by Thomas Synott 3rd from the April 2008 issue of Business Economics. From the article:
The ever-expanding cycles of inflation and unemployment during the Great Inflation are shown in Figure 2. They were described, at first sight, by an electrical engineering professor friend as “an underdamped oscillatory system.” Such systems tend to expand without limit until they break down. How did inflation develop so much momentum? And how did the cycles dampen without a breakdown? One reason for the ever-expanding cycles of the Great Inflation is that long-term expectations for inflation (as compiled by the Federal Reserve Bank of Philadelphia and projecting forward for a ten-year period) lagged in both time and magnitude well behind actual year-to-year inflation.
NABE members can read the full article here. The abstract is available to the public.