Technology-driven forecasts, the Phillips curve, and monetary policy-making

The relationship between unemployment and the inflation rate is nonlinear and negative within the shorter-run timespan of business cycles, but positive in the longer run, the two-generation period in which techno-economic systems advance from innovation to market saturation. Monetary policymaking in the United States utilizes forecasts based upon the shorter term relationship, but these forecasts may be confounded by the countervailing long-wave relationship. This study presents a model that includes both the short- and long-term relationships and shows how inclusion of long-wave considerations changes preferred policy choices.