A short story of the Phillips curve: from Phillips to Friedman...and back?

Abstract A major contribution of Friedman’s 1968 presidential address was the long run vertical Phillips curve. This view has become so profoundly entrenched in macroeconomists’ way of thinking that evidence-based increasing acknowledgment of ‘hysteresis’, has not really discarded it. Although the notion of the NAIRU now prevails on that of the ‘natural’ unemployment rate, its macroeconomic features are the same as Friedman’s natural rate. Yet the path-dependence of empirically estimated NAIRUs causes an anomalous dissociation between theory and empirics. This should call for an alternative theoretical framework that might rehabilitate the original approach taken by Phillips vis à vis Friedman’s legacy.