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The History Of A Theory Development Regarding The Relationship Between Inflation And Unemployment

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  • Djuro Benic

    (University of Dubrovnik)

Abstract

There are several stages or periods in a theory development regarding the relationship between inflation and unemployment, i.e. regarding the Phillips curve. I. Fisher was the first to observe in 1926 a significant statistical relationship between inflation and unemployment, and in 1958 A. W. Phillips found the opposite relationship between the two. After the original Phillips curve, the models of adaptive inflation expectations, rational inflation expectations, the New Keynesian Phillips Curve NKPC were formed. Thereafter, there were more theoretical contributions in the scientific debates, such as the model of dynamic pricing, the model of real wage rigidity suitable for empirical research, and the model with a relatively constant inflation with a wide range of unemployment rates and with a bent long-run Phillips curve.

Suggested Citation

  • Djuro Benic, 2014. "The History Of A Theory Development Regarding The Relationship Between Inflation And Unemployment," Economic Thought and Practice, Department of Economics and Business, University of Dubrovnik, vol. 23(2), pages 411-430, december.
    • Handle: RePEc:avo:emipdu:v:23:y:2014:i:2:p:411-430
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    More about this item

    Keywords

    inflation; unemployment; Phillips curve; the model of adaptive inflation expectations; the model of rational inflation expectations; the New Keynesian Phillips Curve;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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