Journal of Political Economy · 1977 · 1.8K citations · 6 references
Social SciencesEconomicsEconomic PolicyMacroeconomicsMonetary EconomicsBusiness CyclesInflation PolicyMonetary PolicyMonetary Transmission MechanismUnemploymentEquilibrium Inflation DynamicsExpectationsNatural Rate Of UnemploymentPhillips ModelUnemployment Dynamics
Over recent decades, economists have moved from a stable Phillips curve, through the role of inflation expectations and the natural rate of unemployment, to a current stage where an unexpected positive correlation between inflation and unemployment has emerged. This paper investigates whether the observed positive relationship between inflation and unemployment reflects a substantive economic link rather than a mere coincidence.
In the past several decades, professional views on the relation between inflation and unemployment have gone through two stages and are now entering a third. The first was the acceptance of a stable trade-off (a stable Phillips curve). The second was the introduction of inflation expectations, as a variable shifting the short-run Phillips curve, and of the natural rate of unemployment, as determining the location of a vertical long-run Phillips curve. The third is occasioned by the empirical phenomenon of an apparent positive relation between inflation and unemployment. The paper explores the possibility that this relation may be more than coincidental.
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Rational Expectations and the Theory of Price Movements
John F. Muth · Econometrica · 1961 · 5.6K citations
Some International Evidence on Output-Inflation Tradeoffs.
Lucas Robert · American Economic Review · 1973 · 2.5K citations