The Triangular Phillips Curve Model Essay

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The triangular Phillips Curve which was proposed by Gordon (1996) states that the factors cause inflation can be summarized as demand pull, cost push and inflation inertia. Similarly, Gal and Gertler (1999) construct the a kind of hybrid New Keynesian Phillips Curve model and claim that the main factors that affect inflation are the excess aggregate demand, inflation expectation and inflation inertia. In reality, the determinants of inflation are very complex, and the most common four mechanisms of production are stated as follows: 1) Demand pull type. Excessive growth in aggregate demand leads to too much money chasing too few goods. 2) Cost push type. The inflation is caused by the increase in the cost of production and the general level of the price rise.
3)Inflation inertia, that is, once the inflation formed, it will continue for a period of time. 4) Expectation of inflation. Economic activity participants can make a judgment and estimate on the future trend of inflation to get the formation of inflation expectations, which lead to the current increase in the price level.
In the paper of Batini (2005), the theoretical and empirical relationship between the share of labour and inflation in the U.K. was explored, which based on the theory of Cobb–Douglas the New Keynesian Phillips Curve (NKPC). The labour share was examined to be as a useful indicator on measuring the inflationary pressures of the U.K. There was a stable relationship between the information

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