NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

Should we Get rid of the Natural Rate Hypothesis?

Olivier J. Blanchard

NBER Working Paper No. 24057
Issued in November 2017
NBER Program(s):Economic Fluctuations and Growth Program

50 years ago, Milton Friedman articulated the natural rate hypothesis. It was composed of two sub-hypotheses: First, the natural rate of unemployment is independent of monetary policy. Second, there is no long-run trade-off between the deviation of unemployment from the natural rate and inflation. Both propositions have been challenged. The paper reviews the arguments and the macro and micro evidence against each. It concludes that, in each case, the evidence is suggestive, but not conclusive. Policy makers should keep the natural rate hypothesis as their null hypothesis, but keep an open mind and put some weight on the alternatives.

download in pdf format
   (361 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w24057

Users who downloaded this paper also downloaded* these:
Kehoe and Chari w12476 Modern Macroeconomics in Practice: How Theory is Shaping Policy
Mankiw and Reis w24043 Friedman's Presidential Address in the Evolution of Macroeconomic Thought
Engel, Lee, Liu, Liu, and Wu w24059 The Uncovered Interest Parity Puzzle, Exchange Rate Forecasting, and Taylor Rules
Bloom, Jones, Van Reenen, and Webb w23782 Are Ideas Getting Harder to Find?
Blanchard and Summers w24179 Rethinking Stabilization Policy: Evolution or Revolution?
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us