The flattening of the Phillips curve in western developed countries since the 1990s has reduced the effectiveness of monetary policy, weakened the link between inflation and unemployment. This paper combined the Conflict Inflation theory of the Post-Keynesian Economics and Excess demand theory of new Keynesian economics, points out that the rising of the monopoly pricing power of manufacturers in commodity market, the falling of the demand for goods, labor workers’ bargaining power on the market and labor demand, is the important causes the gradual disconnection between inflation and unemployment in the developed countries. The analysis shows that the transfer of industrial capital is a deep root that affects these four factors. Taking the actual economic data of the United States as an example, this paper establishes a Stock-flow consistency model to simulate and verify the influence of the above four factors, and conducts a simulation comparison of the effectiveness of monetary policy in two scenarios: within and without industrial capital transfer. The results show that under the situation that the transfer of industrial capital leads to the weakening of the connection between inflation and unemployment, the effectiveness of monetary policy is significantly reduced or even negatively impacted

Editor: Zhong Yao、Zheng Yifan

From:Shanghai Journal of Economics.2023.No.1.