Endogenous Phillips Line in Equilibrium Useful to Policy-Makers

This paper solves the relationship between the inflation rate and the rate of unemployment by forming an endogenous Phillips linear line in equilibrium, where full-employment holds as a base, using the rate of change in population in equilibrium.  The natural rate of unemployment in price-equilibrium will be replaced by the rate of full-employment in endogenous equilibrium.  For this justification, the author sets up four functions to each of the ratio of net investment to output and the rate of change in population in equilibrium, dividing the total economy into two sectors (the government and private sectors).  Thirty figures (i.e., three areas and twelve countries by sector), whose data are taken from IMF and KEWT 1990-2007, prove that the total economy stays at full-employment regardless of rapid movements in an endogenous rate of inflation over years.  Since both inflation and the rate of employment are endogenously measured, the endogenous Phillips line is now policy-oriented by year, differently from the (external) Phillips curve in the literature.  In particular, the endogenous Phillips line of the government sector moves sharply by year to cope with deficit and inevitable deflation and to maintain its nervous equilibrium, where the private sector needs counter movements for balance.  A contribution of the endogenous Phillips line is that the causes are expressed by basic parameters contained in the above four functions so that policy-makers, using the endogenous Phillips line by year, are able to improve the qualitative degree of equilibrium towards full employment.