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Anthony J. Culyer

The rate of unemployment that is (just) consistent with a zero inflation rate. Although there may be nothing ‘natural’ about it, it does appear to be determined by factors outside the conventional fiscal and monetary instruments of government (for example, such ‘structural’ factors as customary employer and trade union practices). Deregulation and greater flexibility of working practices are argued to be some means by which the natural rate might be reduced. Also sometimes called the ‘non-accelerating inflation rate of unemployment’ (NAIRU), which does not carry

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Thomas Palley

combine to lock-in ideas once they have taken root. Milton Friedman's 1967 presidential address to the American Economic Association (AEA), titled ‘The role of monetary policy’ ( Friedman 1968 ), marked a hysteretic fork in the road of ideas. In it, Friedman argued for abandoning Keynesian Phillips curve theory and adopting his natural rate of unemployment (NRU) hypothesis – also known as the non-accelerating inflation rate of unemployment (NAIRU) hypothesis. The economics profession bought into Friedman's hypothesis, and that has significantly shaped the course of

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Thomas I. Palley

introducing yet another nominal rigidity, this time regarding nominal interest rates. This paper explores the ZLB new orthodoxy. 2 It begins by exploring the economic logic of ZLB economics, and shows that the ZLB explanation of stagnation links directly to classical macroeconomics with its concept of the natural rate of interest (NRI). Put simply, the ZLB prevents the economy from obtaining the NRI needed to ensure goods market clearing at full employment. Thereafter, the paper develops a Keynesian critique of the ZLB explanation of stagnation. The argument is that even

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R. Quentin Grafton, Harry W. Nelson, N. Ross Lambie and Paul R. Wyrwoll

See non-accelerating inflation rate of unemployment.

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Thomas I. Palley

My thanks to Professor Nazim Kadri Ekinci who has written to me, drawing attention to three errors in my specification of the Classical macro model contained in Appendix 1 on pp. 168–169. The corrected specifications are: C = C ( y − T + i B − 1 / p ,   r ,   [ H + B ] / p , z C ) (A6) M = M ( y − T + i B − 1 / p , r , [ H + B ] / p , z M ) (A8) S = I + D + X − M . (A10) Disposable income in equations (A6) and (A8) should include government interest payments.

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Rod Cross

matter’. This reaction from mainstream economists is akin to arguing that Russian roulette is normally a safe game to play. In Section 2 of this paper, the curious case of how the natural rate of unemployment hypothesis came to be established as conventional wisdom in mainstream economics is discussed, curious because both the originators of this hypothesis took hysteresis to be relevant. Section 3 considers different methods of modelling hysteresis in economic systems. In Section 4, the evidence regarding hysteresis effects on unemployment and output is discussed

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Robert J. Gordon

-expected inflation, and expected inflation would then rise one-for-one in response, shifting the short-run PC upwards. This process of upward shifting would continue as long as the unemployment rate remained below U * . Any attempt by policymakers to hold U below U * would fuel a continuously accelerating inflation. In the long run the PC was vertical at U * . The natural rate revolution of Friedman and Phelps overturned the policy-exploitable trade-off in favor of long-run monetary neutrality. But there was still a short-run trade-off that could persist for several years

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Antonella Stirati and Walter Paternesi Meloni

allowed those main tenets of Friedman's view to be discarded until now. Although the notion of the non-accelerating inflation rate of unemployment (NAIRU) now prevails on that of the ‘naturalunemployment rate, implying some changes in emphasis concerning the factors that are seen as its main determinants, the macroeconomic features of Friedman's natural rate and the NAIRU are very much the same. Yet the blatant path-dependence of empirically estimated NAIRUs currently determines a somewhat paradoxical dissociation between theory and empirics, which in our view must

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Louis-Philippe Rochon and Sergio Rossi

’ ( Friedman 1968 , p. 3). In this sense, the purpose of his presidential address is first and foremost to discuss the importance of monetary policy, with the discussion of a natural rate of unemployment and the Phillips curve being somewhat secondary. Indeed, as Forder (2018) argues, Friedman was first and foremost interested in discussing rules vs discretion with respect to monetary policy, and the discussion of a Phillips curve was ‘far from his mind’. Despite Friedman's heavy emphasis on monetary policy (the title of his 1968 paper as well as the titles of each

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T.D. Stanley

Monetary Union) are small and insignificant ( Havranek 2010 ); central bank independence affects inflation ( Klomp/de Haan 2010 ); the combination of tests of the natural rate hypothesis and unemployment hysteresis constitutes a sophisticated Popperian falsification of the natural rate hypothesis ( Stanley 2005 ; Stanley 2004 ). The purpose of this paper is to provide a primer on meta-regression analysis for macroeconomists. I will outline MRA's basic structure and illustrate its use. A more comprehensive introduction may be found in Stanley/Doucouliagos (2012) . 2