Macroeconomic Perspectives on Inflation and Unemployment

Macroeconomic Perspectives on Inflation and Unemployment
Nitzan, Jonathan. (1990). Discussion Papers. Department of Economics. McGill University. pp. 1-46. (Article - Working Paper; English).

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Abstract or Brief Description

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.



Publication Type

Article - Working Paper


capital demand disequilibrium distortions equilibrium imperfections inflation labour macroeconomics markup microeconomics neoclassical perfect competition Philips Curve profit rational expectations stagflation stagnation supply shocks unemployment


BN Policy
BN Distribution
BN Agency
BN Capital & Accumulation
BN Growth
BN Labour
BN Macro
BN Industrial Organization
BN Micro
BN Institutions
BN Value & Price

Depositing User

Jonathan Nitzan

Date Deposited

28 Jan 2005

Last Modified

29 Mar 2016 19:55


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