Evolution of Phillips Curve as a Predictor of Short-Term Inflation

Abstract

Phillips curve is one of the most interesting and controversial issues  in economic theory. It has been present in theoretical discussions and practical  applications for more than fifty years. During the time it has developed from  a very simple univariate relationship to a quite composed multivariate relation  with lags and expectations. The modifications were done to make it consist with  the changing real economic activity and make it convenient tool for making  prediction on short-term inflation. In the paper we try to trace changes  in Phillips curve formulation done with the aspect, but it seems that Phillips  curve still is not able to capture all aspects of the relation between real activity  and changes in inflation and therefore Phillips curve hardly can be seen  as an effective tool for short-time inflation forecasting.