Business Cycle Fluctuations and the Shape Evolution of the Phillips Curve:A Concurrent Discussion on the Selection of Economic Recovery Path
During the"Subprime Crisis"in the United States,many countries introduced large-scale fiscal and monetary poli-cies to guide economic recovery.These policies stimulated economic growth to a certain extent,but a new phenomenon was that inflation did not rise,and remained low.The weakening linkage between output and inflation means that the slope of the Phillips curve is no longer steep,which is the most famous hypothesis namely the"flattening Phillips curve"in the past de-cade.However,after the outbreak of the COVID-19,the global economy fell into recession again.Intermittent interruptions in the supply chains of various countries triggered extremely serious supply shocks.The weakening expectations of residents and enterprises led to a rapid decline in effective demand.These factors led to a significant rise in inflation rates in various coun-tries again.It seems that the current Phillips curve shape can be no longer described as'flattened',and it is likely to steepen at an extremely fast pace,making the linkage between output and inflation more complex.Therefore,a restudy of the Phillips curve is of crucial theoretical and practical significance.This paper comprehensively identifies the shape evolution of China's Phillips curve under different stages of business cycle,and conducts a deep discussion on how to program the path of economic recovery by desirable macroeconomic policies.The conclusions are as follows:First,a slowing down economic growth rate,unilateral changes in inflation,and the shift from globalization to de-globalization are the three core factors that lead to the shape evolution of the Phillips curve.Second,the specific performances of China's Phillips curve in different stages of business cycle are as follows:the curve slope is steeper in the upwards phase of business cycle,while it shows a flattening trend during the contraction stage of business cycle.Third,there are significant differences between different macroeconomic policies to program economic recovery path,among which a gradual regulation of price-based monetary policy combined with fiscal policy is a beneficial attempt to guide a steady recov-ery of economy under current stage.Faced with the dual contraction pressure of output and inflation,it is of great significance to appropriately correct the substitution relationship between output and inflation,as well as to shape a steep slope of Phillips curve,which is benefit for guiding the economy to recover along a safe path,thus avoiding the recurrence of a classical eco-nomic crisis.Our findings are meaningful for stabilizing economic growth,promoting economic recovery,and preventing classical eco-nomic crises.In the current stage of economic recovery,policy authorities still need to maintain a moderately loose tune of monetary policy regulation,while establishing a benign complementary mechanism between various macroeconomic policies.When stepping into the period of economic recovery acceleration,policy authorities should conduct real-time monitoring of macroeconomic fundamentals,gradually weaken policy strength,and avoid the risk of economic overheating caused by policy overshoot.In addition,the government should continue making efforts to expand domestic demand,especially stimulating con-sumption and stabilizing investment,as well as cultivating long-term demand momentum,so as to promote the synergetic re-covery of economic growth and inflation to a reasonable level.
Business Cycle FluctuationsPhillips CurveMacro-controlEconomic Recovery Path