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Phillips Curve Scenario Equations

Explore traditional, expectations-based, and New Keynesian inflation scenarios with editable assumptions.

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Calculator inputs

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How to use this calculator

  1. Enter the known values in the units shown. Results update as you type.
  2. Where results are editable, change one to solve backwards. Lock a value to hold it fixed.
  3. Use the worked example to check the method. Reset restores the starting fields.

Use the result with context

Results are estimates for planning and education. Confirm rates, taxes, fees, and legal requirements with the relevant institution or a qualified professional before making a financial decision.

Formula and method

Expected inflation of 4%, unemployment of 6%, natural unemployment of 4%, a slope of 0.5 and no shock give scenario inflation of 3%.

Inflation = expected inflation − B(unemployment − natural unemployment) + shocks; NK inflation = discount × expectations + κ × output gap.

Worked example

Enter these known values and leave the other values blank.

Phillips curve version
New classical
Inflation expectation (πₑ)
4 %
Unemployment rate (U)
6 %
Natural rate of unemployment (Uₙ)
4 %
Constant (b)
0.5
Unexpected exogenous supply shocks (v)
0
Inflation rate (π)
3 %

Assumptions and limitations

  • This is an illustrative equation system, not an estimated forecast. The unemployment–inflation relationship depends on period, expectations and shocks.
  • Percentage fields use consistent fraction conversions. A shock of 0.01 is a one percentage point shock.
  • Clear an editable unknown before solving an inverse. Selection controls and forced outputs cannot be inferred.

Common questions

What does this model assume?

This is an illustrative equation system, not an estimated forecast. The unemployment–inflation relationship depends on period, expectations and shocks.

Can these equations forecast actual inflation?

The coefficients are entered scenario assumptions. They are not estimated from current economic data, so the result is a model scenario rather than a forecast.

References

Required model inputs: Price stickiness theta must be strictly between zero and one. The production parameter must lie from zero up to, but excluding, one.

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