Quarterly Journal of Austrian Economics

Dynamic Monetary Theory and the Phillips Curve with a Positive Slope

The Quarterly Journal of Austrian Economics

Volume 16, Number 2; Summer 2013

Don Bellante and Roger W. Garrison (1988) compared two alternative explanations of monetary dynamics: those based on a vertical long-run Phillips curve and those derived from analysis of Hayekian triangles. The authors concluded that the only factor differentiating the two models is the “process” whereby the initial cause is converted into the final “neutral” effect. This article refutes that conclusion. To do so, it suffices to demonstrate that the long-term effect of monetary policy is never neutral.  While it is true that after the boom and bust the economy returns to the natural rate of unemployment, the crucial point is that the “natural rate” at the end of the cycle is quite different from the one evident at the start. This requires an “Austrian” Phillips curve with a positive slope.


Ravier, Adrián O. “Dynamic Monetary Theory and the Phillips Curve with a Positive Slope.” The Quarterly Journal of Austrian Economics 16, No. 2 (Summer 2013): 165-186.

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