IDEAS home Printed from https://ideas.repec.org/p/zbw/esprep/157850.html
   My bibliography  Save this paper

Macroeconomic Perspectives on Inflation and Unemployment

Author

Listed:
  • Nitzan, Jonathan

Abstract

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 - Leibniz Information Centre for Economics.
  • Handle: RePEc:zbw:esprep:157850
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/157850/1/bna-159_900101N_Macro_perspectives_on_inflation_unemployment.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Nicholas Georgescu-Roegen, 1979. "Methods in Economic Science," Journal of Economic Issues, Taylor & Francis Journals, vol. 13(2), pages 317-328, June.
    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. Buiter, Willem H, 1980. "The Macroeconomics of Dr. Pangloss: A Critical Survey of the New Classical Macroeconomics," Economic Journal, Royal Economic Society, vol. 90(357), pages 34-50, March.
    4. Tobin, James, 1972. "Inflation and Unemployment," American Economic Review, American Economic Association, vol. 62(1), pages 1-18, 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. A. W. Phillips, 1958. "The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861–1957," Economica, London School of Economics and Political Science, vol. 25(100), pages 283-299, November.
    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. 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.
    10. 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.
    11. 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.
    12. Thomas J. Sargent, 1973. "Rational Expectations, the Real Rate of Interest, and the Natural Rate of Unemployment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(2), pages 429-480.
    13. 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.
    14. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
    15. Grossman, Herschel I., 1982. "$13.00.James Tobin, Asset Accumulation and Economic Activity: Reflections on Contemporary Macroeconomic Theory, The University of Chicago Press, Minneapolis (1980), p. xv + 99," Journal of Monetary Economics, Elsevier, vol. 10(1), pages 134-138, July.
    16. Edmund S. Phelps, 1968. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 76, pages 678-678.
    17. 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.
    18. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    Cited by:

    1. Abla A. H. Bokhari, 2020. "The Twinning of Inflation and Unemployment Phenomena in Saudi Arabia: Phillips Curve Perspective," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 14(2), June.
    2. Nitzan, Jonathan, 1990. "Inflation and Market Structure," EconStor Preprints 157852, ZBW - Leibniz Information Centre for Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nitzan, Jonathan, 1992. "Inflation As Restructuring. A Theoretical and Empirical Account of the U.S. Experience," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 157989, October.
    2. Zijp, R. van, 1990. "New classical monetary business cycle theory," Serie Research Memoranda 0058, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    3. Akhand Akhtar Hossain, 2009. "Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 12777.
    4. repec:eee:labchp:v:2:y:1986:i:c:p:1001-1035 is not listed on IDEAS
    5. Lucas, Jr., Robert E., 1995. "Monetary Neutrality," Nobel Prize in Economics documents 1995-1, Nobel Prize Committee.
    6. Roman Frydman & Edmund S. Phelps, 2013. "Which Way Forward for Macroeconomics and Policy Analysis? [Rethinking Expectations: The Way Forward for Macroeconomics]," Introductory Chapters,, Princeton University Press.
    7. Vallés Liberal, Javier & Viñals, José, 1999. "On the Real Effects of Monetary Policy: A Central Banker's View," CEPR Discussion Papers 2241, C.E.P.R. Discussion Papers.
    8. Thierry Warin, 2006. "From Full Employment to the Natural Rate of Unemployment: A Survey," Middlebury College Working Paper Series 0601, Middlebury College, Department of Economics.
    9. repec:onb:oenbwp:y::i:38:b:1 is not listed on IDEAS
    10. Issing Otmar & Wieland Volker, 2013. "Monetary Theory and Monetary Policy: Reflections on the Development over the last 150 Years," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 233(3), pages 423-445, June.
    11. Willem H. Buiter, 1981. "Macroeconometric Modelling for Policy Evaluation and Design," NBER Technical Working Papers 0013, National Bureau of Economic Research, Inc.
    12. Robert J. Gordon, 2011. "The History of the Phillips Curve: Consensus and Bifurcation," Economica, London School of Economics and Political Science, vol. 78(309), pages 10-50, January.
    13. Läufer, Nikolaus K. A., 1976. "Unsicherheit, Friedmansche Regel und optimale Wirtschaftspolitik," Discussion Papers, Series I 91, University of Konstanz, Department of Economics.
    14. John B. Taylor, 1983. "Rational Expectations Models in Macroeconomics," NBER Working Papers 1224, National Bureau of Economic Research, Inc.
    15. Bernard Walliser, 1982. "Equilibres et anticipations," Revue Économique, Programme National Persée, vol. 33(4), pages 594-638.
    16. Committee, Nobel Prize, 2006. "Edmund Phelps's Contributions to Macroeconomics," Nobel Prize in Economics documents 2006-1, Nobel Prize Committee.
    17. Palley, Thomas, 2012. "The economics of the Phillips curve: Formation of inflation expectations versus incorporation of inflation expectations," Structural Change and Economic Dynamics, Elsevier, vol. 23(3), pages 221-230.
    18. Michael Paetz, 2007. "Robust Control and Persistence in the New Keynesian Economy," Quantitative Macroeconomics Working Papers 20711, Hamburg University, Department of Economics.
    19. Aurélien Goutsmedt, 2021. "From the Stagflation to the Great Inflation: Explaining the US economy of the 1970s," Revue d'économie politique, Dalloz, vol. 131(3), pages 557-582.
    20. Aurélien Goutsmedt & Goulven Rubin, 2018. "Robert J. Gordon and the introduction of the natural rate hypothesis in the Keynesian framework," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01821825, HAL.
    21. Lucas Papademos, 2005. "Macroeconomic theory and monetary policy: the contributions of Franco Modigliani and the ongoing debate," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 58(233-234), pages 187-214.
    22. Athanasios Papadopoulos & Giuseppe Diana & Moise Sidiropoulos, 2005. "Central Bank Reform and Inflation Dynamics in the Transition Economies theory and some evidence," Money Macro and Finance (MMF) Research Group Conference 2005 58, Money Macro and Finance Research Group.

    Corrections

    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.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/zbwkide.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.