📊 Phillips Curve Calculator
Estimate inflation using the expectations-augmented Phillips Curve, which links inflation to the gap between actual and natural unemployment.
What the Phillips Curve shows
The Phillips Curve describes an observed inverse relationship between unemployment and inflation: when unemployment falls below its natural rate, inflation tends to rise, and when unemployment rises above its natural rate, inflation tends to fall. The expectations-augmented version adds people’s inflation expectations to the model.
The formula
This calculator uses the standard expectations-augmented Phillips Curve: Inflation = Expected Inflation – beta × (Actual Unemployment – Natural Unemployment) + Supply Shock. Beta is a sensitivity coefficient describing how strongly inflation reacts to the unemployment gap, and the optional supply shock term captures one-off cost pressures like energy price spikes.
Real-world inflation depends on many additional factors, and the sensitivity coefficient varies across countries and time periods, so treat results as an educational approximation rather than a precise forecast. This tool is for general economics learning and planning only.