Does the Expectations Trap Render the Natural-Rate Model Invalid in the Disinflationary Zone?

Abstract

This chapter raises some questions about the epistemological status of the theory underpinning the original Phillips curve formulation, and the correspondence between the empirical data and the textbook (theoretical) representations of the Natural-Rate Expectations Augmented Phillips (N-REAP) curve model. This is no antiquarian investigation, since these curves have dominated applied macroeconomics for over three decades.