THE HISTORY OF A THEORY DEVELOPMENT REGARDING THE RELATIONSHIP BETWEEN INFLATION AND UNEMPLOYMENT

Djuro Benic ()
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Djuro Benic: University of Dubrovnik

Economic Thought and Practice, 2014, vol. 23, issue 2, 411-430

Abstract: There are several stages or periods in a theory development regarding the relationship between inflation and unemployment, i.e. regarding the Phillips curve. I. Fisher was the first to observe in 1926 a significant statistical relationship between inflation and unemployment, and in 1958 A. W. Phillips found the opposite relationship between the two. After the original Phillips curve, the models of adaptive inflation expectations, rational inflation expectations, the New Keynesian Phillips Curve NKPC were formed. Thereafter, there were more theoretical contributions in the scientific debates, such as the model of dynamic pricing, the model of real wage rigidity suitable for empirical research, and the model with a relatively constant inflation with a wide range of unemployment rates and with a bent long-run Phillips curve.

Keywords: inflation; unemployment; Phillips curve; the model of adaptive inflation expectations; the model of rational inflation expectations; the New Keynesian Phillips Curve (search for similar items in EconPapers)
JEL-codes: E24 E31 (search for similar items in EconPapers)
Date: 2014
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