In 2006 the legendary Gregor Smith published one of the greatest articles in the history of economics. The title of the article says it all: Japan’s Phillips Curve Looks Like Japan.
In the article, Smith plotted the monthly inflation rate against the monthly unemployment rate of Japan between January 1980 to August 2005. After reflecting the graph in the y-axis, he discovered that the resultant Phillips Curve was in the shape of the land of the samurai.
Image Credit: Gregor Smith 2006
Smith points out that “clearly visible are the islands of Hokkaido and Honshu, though it is somewhat difficult to separately distinguish the southern islands of Kyushu and Shikoku.” Moreover, Tokyo Bay is visible and the data point to the far left is, obviously, the island of Fukue-Jima.
Now, you may argue that the discovery that Japan’s Phillips Curve looks like Japan is pointless. Well, you’d be wrong. You see, Smith anticipated your negative thoughts and stated in his abstract that “this research shows that these outcomes were predictable as part of a stable, readily recognized Phillips curve.” So, if the Japanese government realised their Philips Curve was the in shape of their country, they would have been able to manage inflation and unemployment better.