Mych12b - Chapter 12 Unemployment and Inflation (Continued)...

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Chapter 12 Unemployment and Inflation (Continued) Trade offs Cost of Unemployment Cost of Inflation 1
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A recapitulation of the trade-off question in graphic terms 1.The excitement of the Phillips Curve – Keynesian School 2.The criticism of Friedman and Phelps (long run position) 3.The Lucas critique (explanation about short run events) 4.The disappearance of the Phillips curve (US, 1970s) 5.The Keynesian expectation-augmented Phillips curve – 6.The taming of expectations, US 1980-90s: Gradual (gradualism: Keynesian) 7. The end of Sargent’s 4 hyperinflations, Europe: Fast (‘Cold Turkey’: The classical view) 2
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The original Phillips curve view Figure 12.1 U.S. economy during the 1960s
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4 The Friedman – Phelps position Long term situation
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Lucas critique and implications Figure 12.2 United States, 1970-2005
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The expectations-augmented Phillips curve Figure 12.7 United States, 1970-2005
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Comparison: Chaos into pattern; pattern allows action 7 Raw data (Classicals: policy is useless) Treated (Keynesians: Room for action)
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8 The Volcker and Greenspan Years Bringing down the cyclical unemployment
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The Volcker and Greenspan Years 9 Taming the inflationary Expectations
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10 That was the historical record. Could it be done ‘better’?
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This note was uploaded on 03/10/2010 for the course ECON 3140 taught by Professor Mbiekop during the Spring '07 term at Cornell University (Engineering School).

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Mych12b - Chapter 12 Unemployment and Inflation (Continued)...

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