Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/157850
Authors: 
Nitzan, Jonathan
Year of Publication: 
1990
Series/Report no.: 
Discussion Papers, Department of Economics, McGill University
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.
Subjects: 
capital
demand
disequilibrium
distortions
equilibrium
imperfections
inflation
labour
macroeconomics
markup
microeconomics
neoclassical
perfect competition
Philips Curve
profit
rational expectations
stagflation
stagnation
supply shocks
u
URL of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by-nc-nd/4.0/
Document Type: 
Working Paper

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