Optimality on the Short-Run Phillips Curve Revisited

Abstract

The misery index criterion model was developed by Golden, et al. (1987) to explain the public's preference for having the inflation rate lower than the unemployment rate. This model clearly fails to explain the prevailing super high inflation rate in Latin American countries. This paper attempts to introduce a generalized weighted misery index and to show that, by following the weighted misery-minimization process, the model can explain the Latin American experience and also include the American experience as a special case.