Empirical Research Based On Rational Expectations Phillips Curve

In macro-economy, inflation and unemployment are two important indexes to measure actual economic operation in a country or region, and play an important role in a country's economic growth. At the same time, they are also important references for monetary policy-making of central bank. The Phillips Curve elaborates that there is a trade -off between unemployment rate and monetary wage change rate. Monetarists represented by Milton Friedman put forward their own views. They believe that Phillips Curve is vertical in the long run. Economists favoring rational expectation believe that Phillips Curve is vertical not only in long-term but also in short-term. The research on economic theories is intended to guide economic practice, so is the research on the theory of Phillips Curve. Each kind of Phillips Curve has its own policy meanings. For instance, the original Phillips Curve indicating the trade-off between inflation rate and unemployment rate discloses that to reduce unemployment rate, government must endure higher inflation rate. Lucas' Phillips Curve reveals that both in the long run and in the short run, expansionary monetary policy can only lead to inflation, and has no effect on real variables such as yield and employment. Under such conditions, macroeconomic policies are non-effective. But does Lucas' Phillips Curve really exist? Are macroeconomic policies useless? These are the questions that the thesis wants to answer.The thesis is divided into four parts:In part 1, the author relates the main content of Phillips Curve theory and its theoretical development. The author first introduces the traditional Phillips Curve, including unemployment rate-wage change rate curve, unemployment rate-inflation rate curve and inflation rate-output gap curve, and then Phillips Curve with expectations favored by monetarists, and later rational expectation Phillips Curve put forward by Lucas.In part 2, the author does empirical study on the problem that whether the relationship between inflation rate and output gap in China is in line with the theory of rational expectation Phillips Curve. On the basis of a comparison of the data of actual inflation with inflation expectation, the following conclusions are reached: the formation mechanism of inflation expectation in China is not on the base of rational expectation, Lucas's rational-expectation Phillips Curve does not exist in China. Monetary policy is not useless and monetary policy-making authority can regulate themacro-economy by using monetary policy.In part 3, the author does research on other countries including the U.S., Britain and Japan to see whether the relations between inflation rate and output gap in these countries conform to Lucas' rational-expectation Phillips Curve. The author then analyses the Phillips Curve in the U.S., Britain and Japan and comes to the same conclusion that Lucas's rational-expectation Phillips Curve doesn't exist in actual economic operation and macroeconomic policies are effective.In part 4, the author analyses the practice of macroeconomic regulation in China and put forward corresponding policy suggestions.