HAS THE PHILLIPS CURVE FLATTENED?

We contribute to the recent debate on the instability of the slope of the Phillips curve by offering insights from a flexible time-varying instrumental variable (IV) approach robust to weak instruments. Our robust approach focuses directly on the Phillips curve and allows general forms of instability, in contrast to current approaches based either on structural models with time-varying parameters or IV estimates in ad-hoc sub-samples. We find evidence of a weakening of the slope of the Phillips curve starting around 1980. We also offer novel insights on the Phillips curve during the recent pandemic: The flattening has reverted and the Phillips curve is back.