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Due to historical differences, countries differ in how quickly a change in actual inflation is incorporated into a change in expected inflation. In a country such as Japan that has had very little inflation in recent memory, it will take longer for a change in the actual inflation rate to be reflected in a corresponding change in the expected inflation rate. In contrast, in a country such as Argentina, one that has recently had very high inflation, a change in the actual inflation rate wil immediately be reflected in a corresponding change in the expected inflation rate. What does this imply about the short-run and long-run Phillips curves in these two types of countries? What does this imply about the effectiveness of monetary and fiscal policy to reduce the unemployment rate?
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