Macroeconomics II Lecture notes (1) on: The natural rate of unemployment and the long-run Phillips curve

The …rst serious attack to the theoretical propositions and policy implications put forward by the "neoclassical synthesis" is due to Milton Friedman (1968) and Edmund Phelps (1967). At the end of the 1960s, they independently developed similar ideas aimed at explaining the positive correlation between output ‡uctuations and in‡ation in the short-run, preserving the neoclassical property of long run money neutrality. In the following notes a simple formalization of the original Friedman’s idea (1968, 1977) is presented and brie‡y discussed.