4  BIS Review 29/2007  Slope of the Phillips Curve In traditional Phillips-curve equations, inflation depends on past values of inflation, an unemployment gap (the difference between the unemployment rate and an estimate of its natural rate), and variables such as the relative price of energy and import prices.
When researchers estimate these equations, they typically find that the coefficient on the unemployment gap has declined (in absolute value) since the 1980s, often by a marked amount. 4 In other words, the evidence suggests that the Phillips curve has flattened.