Beyond the Phillips Curve Orthodoxy: Reconsidering the Inflation–Unemployment Trade-Off Under Secular Stagnation and Structural Labor Market Fragmentation

Abstract

The canonical Phillips Curve framework has long underpinned monetary policy calibration across advanced and emerging economies; however, its empirical reliability has deteriorated markedly in the post-2008 macroeconomic environment. This study employs a panel error-correction model augmented with time-varying parameter estimation across 34 OECD economies (2000–2023) to reassess the inflation–unemployment nexus under conditions of secular stagnation, labor market dualization, and anchored inflation expectations. Controlling for hysteresis effects, gig-economy proliferation, and central bank forward guidance credibility, our findings indicate a statistically significant flattening of the short-run Phillips Curve slope, rendering conventional demand-side stimulus increasingly ineffectual. We further identify structural breaks coinciding with the COVID-19 labor supply shock and post-pandemic wage-setting dynamics. Policy implications challenge inflation-targeting regimes predicated on a stable non-accelerating inflation rate of unemployment.