Today’s post is a fun one: a working paper from 2006 entitled “Japan’s Phillips Curve Looks Like Japan”.
And indeed, it does:
(Well, as long as you reflect the plot across the y-axis, notice the plot is of -x rather than x on the x-axis.)
The Phillips curve describes the observation that inflation and unemployment have an inverse relationship in the short term (i.e., as unemployment falls, inflation rises and vice-versa).
This humorous working paper did actually lead to a full publication with the same name in 2008:
During the past 15 years Japan has experienced unprecedented, high unemployment rates and low (often negative) inflation rates. This research shows that these outcomes were predictable as part of a stable, readily recognized Phillips curve.
There is a well-known joke in economics attributed to Nobel laureate Simon Kuznets that goes something like this: “There are four types of economies: developed, underdeveloped, Japan, and Argentina.”
I guess this is one way in which Japan’s economy is very much like the rest of the world’s (at least up to 2005).
Hat tip to Prof. Todd Jones on Twitter.