The Bones and Shapes of the Phillips Curve

The COVID-19 pandemic reignited debate on the U.S. Phillips curve. Using MSA-level panel data (2001-2024), we employ a Two-Stage Least Squares (2SLS) instrumental variable strategy with a shift-share instrument to estimate core non-tradable inflation's response to a v/u-based slack measure. We distinguish structural slope stability from state-dependent non-linearities via a threshold model. Our analysis addresses whether the slope of the Phillips Curve changed during and after the Pandemic in the United States by evaluating if recent inflation dynamics reflect an altered structural trade-off ("bones") or the activation of non-linear "shapes" in response to extreme labor market tightness. This distinction offers critical insights into the unemployment cost of disinflation.