Understanding Inflation's Asymmetry: New Firm-Level Evidence on the Phillips Curve

This episode delves into new research exploring the Phillips curve, a key model linking inflation and economic slack. Using extensive firm-level survey data from the UK and US, economists uncover compelling evidence that the Phillips curve is convex, meaning prices respond differently to positive versus negative demand shocks. This non-linear relationship has significant implications for central banks and how monetary policy can effectively manage inflation.