Abstract
This chapter pays attention to the Philipps Curve. This theory states that inflation and unemployment have a stable and inverse relationship (Phillips 1958). In this theory, economic growth is expected to generate inflation and more work opportunities, which decrease unemployment . We review how the application of AI would impact assumptions of the Philips Curve as well as the potential impact of AI on this theory. In particular, our focus is on the critical aspect of the Philips Curve, which is unemployment and inflation. When the Phillips Curve made an appearance into the scene, labour had a considerable role in the production of goods and services. With several countries intensely pursuing technology, we begin to see most factories adopting AI-powered technologies in their production lines. Mostly, we are beginning to see a massive line of production processes being automated. When a considerable part of the production line becomes automated (mechanized), we think the critical aspect of the Philips Curve will be impacted. Variables of both inflation and unemployment are key to the Phillips Curve. Our conclusion is that in the era of artificial intelligence, where a considerable part of the production line is expected to be automated (mechanized), we think the critical aspect of the Philips Curve will be impacted. In the automated world, economic growth could be fuelled by robotic infrastructure. Because the robotic infrastructure would have possibly replaced individuals, growth would not be accompanied by employment opportunities. At the same time, since this could result in unemployment, the demand for goods and services could be expected to be put under pressure. If supply remains the same because the robotic infrastructure will be producing, potentially at a higher rate than humans, prices could be expected to decline, dampening inflation prospects.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
Alisa M (2015) The Relationship between inflation and unemployment: a theoretical discussion about the Philips Curve. J Int Bus Econ 3:89–97
Chugh SK (2015) Modern macroeconomics. Massachussets, MIT Press, Boston
Dritsaki C, Dritsaki M (2013) Phillips curve inflation and unemployment: an empirical research for Greece. Int J Comput Econ Econom 3:27–42
Esu G, Atan J (2017). The Philip’s curve in Sub-Saharan Africa: evidence from panel data analysis. https://mpra.ub.uni-muenchen.de/82112/
Friedman M (1968) The role of monetary policy. Am Econ Rev 1969(58):102–110
Gordon RJ (2008) The history of the Phillips curve: consensus and bifurcation. Economica 78(309):10–50
Govera H (2017) The relationship between inflation and unemployment. Masters dissertation, University of Western Cape, South Africa
Hall TE, Hart WR (2012) The Samuelson-Solow Phillips curve and the great inflation. Hist Econ Rev 55:62–72
Humphrey TM (1985) The early history of the Phillips curve. Econ Rev, Fed Reserve Bank Richmond, Sep/Oct
Islam F, Hassan K, Mustafa M, Rahman M (2003) The empirics of US Phillips curve: a revisit. Am Bus Rev 21:107
Iyeli EGE (2017) Price expectation and the Philips Curve Hypothesis: The Nigerian Case. Int J Dev Econ Sustain 5(4):1–10
Lipsey RG (1960) The relation between unemployment and the rate of change of money wages rate in the United Kingdom, 1862-1957: a further analysis. Economica 27:1–31
Lucas RE (1976) Econometric policy evaluation: a critique. In: Carnegie-Rochester conference series on public policy, vol 1976, pp 19–46
Marwala T (2009) Computational intelligence for missing data imputation, estimation, and management: knowledge optimization techniques. IGI Global. ISBN: 978-1-60566-336-4
Marwala T (2007) Computational intelligence for modelling complex systems. Research India Publications, Delhi. ISBN: 978-81-904362-1-2
Motyovszki G (2013) The evolution of the Phillips curve concepts and their implications for economic policy. Central European University, Budapest
Ogujiuba K, Abraham TW (2013) Testing the Philips curve hypothesis for Nigeria: are there likely implications for economic growth? Econ Manag Financ Mark 8:59
Orji A, Orji-Anthony I, Okafor J (2015) Inflation and unemployment nexus in Nigeria: another test of the Phillip’s curve. Asian Econ Financ Rev 5:766–778
Palley T (2012) The economics of the Phillips curve: Formation of inflation expectations versus incorporation of inflation expectations. Struct. Chang Econ Dyn 23:221–230
Phelps ES (1968) Money-wage dynamics and labor-market equilibrium. J Polit Econ 76:678–711
Phillips AW (1958) The relation between unemployment and the rate of change of money wage rates in the United Kingdom, 1861–1957. Economica New Ser 25(100):283–299
Roberts JM (1995) New Keynesian economics and the Phillips curve. J Money Credit Bank 27:975–984
Russell B, Banerjee A (2008) The long-run Phillips curve and non-stationary inflation. J Macro Econ 30:1792–1815
Simionescu M (2014) Testing the existence and stability of Phillips curve in Romania. Monten J Econ 10:67
Voinea L (2018) Explaining the post-crisis Philips curve: cumulated wage gap matters for inflation. CEPS Working Document No 2018/05, June 2018
Zayed NM, Islam MR, Hasan, KR (2018) Testing Phillips curve to examine the inflation rate regarding unemployment rate, annual wage rate and GDP of Philippines: 1950–2017. Acad Account Financ Stud J
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 2020 Springer Nature Switzerland AG
About this chapter
Cite this chapter
Moloi, T., Marwala, T. (2020). The Phillips Curve. In: Artificial Intelligence in Economics and Finance Theories . Advanced Information and Knowledge Processing. Springer, Cham. https://doi.org/10.1007/978-3-030-42962-1_6
Download citation
DOI: https://doi.org/10.1007/978-3-030-42962-1_6
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-030-42961-4
Online ISBN: 978-3-030-42962-1
eBook Packages: Computer ScienceComputer Science (R0)