IDEAS home Printed from
   My bibliography  Save this paper

Macroeconomic Perspectives on Inflation and Unemployment


  • Nitzan, Jonathan


The present paper is the first in a series of three essays in which we examine the macroeconomic and structural approaches to inflation. In this paper we explore some of the key contributions to the macroeconomic literature which appeared since the late 1950s. Much of this literature evolved in a dual love hate relationship with the Phillips Curve. Scholars who endorsed the Phillips Curve on the basis of historical evidence were surprised when it started to crumble as soon as they assimilated it into their macroeconomic models. The gradual emergence of stagflation and the progressive breakdown of the Phillips Curve presented mainstream macroeconomics with the most serious challenge since the Second World War. Macroeconomists attacked the Phillips Curve but their criticisms sought to modify, not nullify. The idea that inflation and unemployment were inversely related was apparently too significant to discard so the notional relationship was simply ‘augmented’ by auxiliary factors. The cost of saving the Phillips Curve was substantial. To explain stagflation, macroeconomists resorted to 'disequilibria,' ‘rigidities’ and ‘exogenous shocks’ and they abandoned, at least temporarily, the ideal formulation of the neoclassical synthesis.

Suggested Citation

  • Nitzan, Jonathan, 1990. "Macroeconomic Perspectives on Inflation and Unemployment," EconStor Preprints 157850, ZBW - German National Library of Economics.
  • Handle: RePEc:zbw:esprep:157850

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Frydman, Roman, 1981. "Sluggish Price Adjustments and the Effectiveness of Monetary Policy under Rational Expectations: A Comment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 13(1), pages 94-102, February.
    2. Gordon, Robert J., 1976. "Recent developments in the theory of inflation and unemployment," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 185-219, April.
    3. Tobin, James, 1972. "Inflation and Unemployment," American Economic Review, American Economic Association, vol. 62(1), pages 1-18, March.
    4. Maddock, Rodney & Carter, Michael, 1982. "A Child's Guide to Rational Expectations," Journal of Economic Literature, American Economic Association, vol. 20(1), pages 39-51, March.
    5. J. C. R. Rowley & D. A. Wilton, 1974. "The Sensitivity of Quarterly Models of Wage Determination to Aggregation Assumptions," The Quarterly Journal of Economics, Oxford University Press, vol. 88(4), pages 671-680.
    6. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
    7. Robert E. Hall, 1980. "Employment Fluctuations and Wage Rigidity," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 11(1, Tenth ), pages 91-142.
    8. Fortin, Pierre, 1989. "How 'natural' is Canada's high unemployment rate?," European Economic Review, Elsevier, vol. 33(1), pages 89-110, January.
    9. Edmund S. Phelps, 1968. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 76, pages 678-678.
    10. Phelps, Edmund S & Taylor, John B, 1977. "Stabilizing Powers of Monetary Policy under Rational Expectations," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 163-190, February.
    11. Taylor, John B, 1975. "Monetary Policy during a Transition to Rational Expectations," Journal of Political Economy, University of Chicago Press, vol. 83(5), pages 1009-1021, October.
    12. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
    13. Fischer, Stanley, 1977. "Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 191-205, February.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Nitzan, Jonathan, 1990. "Inflation and Market Structure," EconStor Preprints 157852, ZBW - German National Library of Economics.


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:esprep:157850. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.