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A short story of the Phillips curve: from Phillips to Friedman… and back?

Author

Listed:
  • Antonella Stirati

    (Department of Economics, Roma Tre University, Italy)

  • Walter Paternesi Meloni

    (Department of Economics, Roma Tre University, Italy)

Abstract

A major contribution of Friedman's 1968 presidential address was the introduction of the long-run vertical Phillips curve. That view, which is consistent with neoclassical foundations, has become so profoundly entrenched in macroeconomists' thinking that increasing evidence of 'hysteresis' has not as yet dislodged it. The prevailing notion of the non-accelerating inflation rate of unemployment (NAIRU) is constructed in terms of the 'natural' unemployment rate, which has allowed for some changes regarding its microeconomic determinants. However, the macroeconomic features of Friedman's natural rate and the NAIRU remain very much the same and unchanged. The blatant path-dependence of empirically estimated NAIRUs creates a dissociation between macroeconomic theory and empirics which, in our view, is unacceptable and demands a change of perspective. Adopting an alternative theory of distribution and employment might rehabilitate the original approach taken by Phillips vis-Ã -vis Friedman's legacy.

Suggested Citation

  • Antonella Stirati & Walter Paternesi Meloni, 2018. "A short story of the Phillips curve: from Phillips to Friedman… and back?," Review of Keynesian Economics, Edward Elgar Publishing, vol. 6(4), pages 493-516, October.
    • Handle: RePEc:elg:rokejn:v:6:y:2018:i:4:p493-516
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    Citations

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    Cited by:

    1. Fontanari, Claudia & Palumbo, Antonella & Salvatori, Chiara, 2020. "Potential Output in Theory and Practice: A Revision and Update of Okun's Original Method," Structural Change and Economic Dynamics, Elsevier, vol. 54(C), pages 247-266.
    2. Ricardo Summa & Julia Braga, 2020. "The (conflict-augmented) Phillips Curve is alive and well," Working Papers 0055, ASTRIL - Associazione Studi e Ricerche Interdisciplinari sul Lavoro.
    3. Ricardo Summa & Julia Braga, 2020. "Two routes back to the old Phillips curve: the amended mainstream model and the conflict augmented alternative," Bulletin of Political Economy, Bulletin of Political Economy, vol. 14(1), pages 81-115, June.
    4. Roberto Ciccone & Antonella Stirati, 2019. "Blanchard e Summers: rivoluzione o conservazione? (Blanchard and Summers: revolution or conservation?)," Moneta e Credito, Economia civile, vol. 72(287), pages 207-218.
    5. Prante, Franz J. & Barmucci, Alessandro & Hein, Eckhard & Truger, Achim, 2019. "Interactive macroeconomics: A pluralist simulator," IPE Working Papers 117/2019, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    6. Fontanari, Claudia & Levrero, Enrico Sergio & Romaniello, Davide, 2024. "A composite index for workers’ bargaining power and the inflation rate in the United States, 1960–2018," Structural Change and Economic Dynamics, Elsevier, vol. 70(C), pages 682-698.
    7. Guilherme Spinato Morlin & Nikolas Passos & Riccardo Pariboni, 2024. "Growth Theory and the Growth Model Perspective: Insights from the Supermultiplier," Review of Political Economy, Taylor & Francis Journals, vol. 36(3), pages 1130-1155, July.
    8. Davide Romaniello & Antonella Stirati, 2024. "Cost-push and conflict inflation in theory and practice - with a discussion of the Italian case," FMM Working Paper 96-2024, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    9. Sergio Cesaratto, 2022. "Le frontiere della politica monetaria: aspetti didattici, teorici, di politica economica. Un review article (The frontiers of monetary policy: didactic, theoretical, economic policy aspects. A review ," Moneta e Credito, Economia civile, vol. 75(299), pages 353-373.
    10. Sergio Cesaratto & Gennaro Zezza, 2018. "Farsi male da soli. Disciplina esterna, domanda aggregata e il declino economico italiano," Department of Economics University of Siena 793, Department of Economics, University of Siena.
    11. Pedrosa, Ítalo & Brochier, Lídia & Freitas, Fabio, 2023. "Debt hierarchy: Autonomous demand composition, growth and indebtedness in a Supermultiplier model," Economic Modelling, Elsevier, vol. 126(C).
    12. Guilherme Spinato Morlin, 2021. "Inflation and Macroeconomics in the US during the Golden Age," HISTORY OF ECONOMIC THOUGHT AND POLICY, FrancoAngeli Editore, vol. 10(1), pages 107-130.
    13. Walter Paternesi Meloni & Antonella Stirati, 2021. "What has driven the delinking of wages from productivity? A political economy-based investigation for high-income economies," Working Papers PKWP2104, Post Keynesian Economics Society (PKES).
    14. Lídia Brochier, 2020. "Conflicting‐claims and labour market concerns in a supermultiplier SFC model," Metroeconomica, Wiley Blackwell, vol. 71(3), pages 566-603, July.
    15. Stirati, Antonella & Paternesi Meloni, Walter, 2021. "Unemployment and the wage share: a long-run exploration for major mature economies," Structural Change and Economic Dynamics, Elsevier, vol. 56(C), pages 330-352.
    16. Di Bucchianico, Stefano, 2019. "The Impact of Financialization on the Rate of Profit: A Discussion," Centro Sraffa Working Papers CSWP36, Centro di Ricerche e Documentazione "Piero Sraffa".
    17. Walter Paternesi Meloni & Antonella Stirati, 2023. "The decoupling between labour compensation and productivity in high‐income countries: Why is the nexus broken?," British Journal of Industrial Relations, London School of Economics, vol. 61(2), pages 425-463, June.
    18. Di Bucchianico, Stefano, 2021. "Inequality, household debt, ageing and bubbles: A model of demand-side Secular Stagnation," IPE Working Papers 160/2021, Berlin School of Economics and Law, Institute for International Political Economy (IPE).

    More about this item

    Keywords

    inflation and unemployment; Phillips curve; NAIRU; real wages; income distribution;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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