Nobel Lecture: Inflation and Unemployment
Abstract
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.
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Friedman (1977) argued that high inflation generates uncertainty that distorts investment, elongates the horizon risk premium, and impedes long-run growth.
“Friedman (1977) famously argued that high inflation generates uncertainty that distorts investment, elongates the horizon risk premium, and impedes long-run growth.”
From Fiscal Policy, Inflation Volatility, and Macroeconomic Instability in Nigeria: A GARCH-Family Modelling Approach with Asymmetric Effects and Structural Break Analysis (2026) · cites this paper as Friedman (1977)
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Ibrahim, M., & Alagidede, P. (2018) · Journal of Policy Modeling · doi:10.1016/j.jpolmod.2018.08.001 · Cited by 323 · see citing works
Acheampong, A. O., Dzator, J., Dzator, M., & Salim, R. (2022) · Technological Forecasting and Social Change · doi:10.1016/j.techfore.2022.121843 · Cited by 217 · see citing works
Promise, U. K., Chukwudi, N. A., & Miriam, M. C. (2026) · International Journal of Research and Innovation in Social Science · doi:10.47772/ijriss.2026.100400264
- Authors
- Friedman, M.
- Corresponding author
- Friedman, Milton
- Venue
- Journal of Political Economy
- Publisher
- University of Chicago Press
- Published
- 1977-06
- Volume
- 85
- Issue
- 3
- Pages
- 451-472
- ISSN
- 0022-3808 (ISSN-L)
- 1537-534X
- OpenAlex
- W2076301377
- Cited by
- 1,799
- References
- 0
- Citations by year
- 2026: 52 · 2025: 51 · 2024: 68 · 2023: 59 · 2022: 63 · 2021: 58 · 2020: 89 · 2019: 65 · 2018: 82 · 2017: 58 · 2016: 60 · 2015: 56 · 2014: 62 · 2013: 76 · 2012: 55
- FWCI
- 47.98
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- Journal of Political Economy (publishedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Monetary Policy and Economic Impact
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Unemployment and Economic Growth
- Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Economic Theory and Policy
- Keywords
- inflation-unemployment relationship, Phillips curve, natural rate of unemployment, inflation expectations, short-run Phillips curve, long-run Phillips curve, monetary policy
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