US and Europe Are Indeed Similar Under Cycles of Inflation and Unemployment

US and Europe Are Indeed Similar Under Cycles of Inflation and Unemployment
A cashier exchanges a 50 Euro banknote for U.S. dollars at an exchange counter in Rome, Italy, on July 13, 2022. Gregorio Borgia/AP Photo
Law Ka-chung
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Commentary
The relationship between unemployment and core Consumer Price Index inflation is often plotted to produce the Phillips Curve. The results will differ between economies. To many observers, the main difference between U.S. and European economies is the relatively weak real activity and persistently high inflation of the latter. This suggests the United States is situated in a more inner region than Europe on the Phillips curve, where the x- and y-axes refer to unemployment and inflation rates, respectively. That says the United States has both lower unemployment and inflation rates than Europe. To see if this is true, we plot the curves, starting from 1998 (when data began) to 2022, of three economies for comparison.
Law Ka-chung
Law Ka-chung
Author
Law Ka-chung is a commentator on global macroeconomics and markets. He has been writing numerous newspaper and magazine columns and talking about markets on various TV, radio, and online channels in Hong Kong since 2005. He covers all types of economics and finance topics in the United States, Europe, and Asia, ranging from macroeconomic theories to market outlook for equities, currencies, rates, yields, and commodities. He has been the chief economist and strategist at a Hong Kong branch of the fifth-largest Chinese bank for more than 12 years. He has a Ph.D. in Economics, MSc in Mathematics, and MSc in Astrophysics.
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