phillips curve

business cycle

cycle model

inflation targeting

Journal of Political Economy

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.

Nobel Lecture: Inflation and Unemployment