Shock‐Dependent Phillips Curve: Evidence From the United States

ABSTRACT This paper investigates the shock‐dependent nature and evolution of the Phillips curve slope in the United States using a Bayesian structural vector autoregression model with sign restrictions on monthly data covering the period between 1960 and 2025. The slope is defined as the ratio of cumulative impulse responses of inflation to unemployment following identified demand, supply, and monetary policy shocks. Results indicate the slope is negative for demand and policy shocks but positive for supply shocks, generally steepening over the forecast horizon. A significant finding is the flattening of the policy‐shock‐dependent slope since 1990, suggesting a weaker inflation response to policy‐induced unemployment changes. Historical decompositions further illustrate the contribution of each shock to developments in inflation and unemployment. These findings highlight shock‐specific policy trade‐offs and increased challenges for monetary policy effectiveness due to the recent flattening.