Aggregate demand and the Phillips curve

Many macroeconomic models are based on a view of aggregate demand based on the Euler equation, and on a view of aggregate supply based on the Phillips curve (linked to nominal rigidities). François Geerolf shows that neither of those two receive much validation in the light of macroeconomic evidence. For aggregate demand, income effects going through adjustable rate mortgages and loans are much more important than substitution effects, either for consumption or investment. On the aggregate supply side, the Phillips curve was never observed outside of fixed exchange rates, and there appears to be no trade-off between inflation and unemployment under flexible exchange rates.

About the speaker:

François Geerolf is an Economist at OFCE, an Associate Professor at Sciences Po, as well as a CEPR research Fellow. He has been an Assistant Professor at UCLA, a Visiting Scholar at MIT, and a Visiting Fellow at Harvard University. He holds a PhD from Sciences Po, an engineering degree from Ecole Polytechnique and Ecole des Ponts, and a MSc from the Paris School of Economics. He was the recipient of the Top Finance Graduate Award awarded from the Copenhagen Business School. François works on macroeconomics and financial economics.