In his Haavelmo lecture Blanchard asked: "Should we reject the natural rate of unemployment hypothesis?". The natural rate hypothesis was developed by Milton Friedman and Edmund Phelps in the 1960s and it claims that a certain degree of unemployment is unavoidable in a free labour market. The hypothesis involved two key policy propositions:
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the natural rate of unemployment is independent of monetary policy
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there is no long-run trade-off between unemployment and inflation
In the lecture, Blanchard reviews the arguments and the micro and macro evidence against each proposition.
About Olivier Blanchard
Professor Olivier Blanchard is the president elect of the American Economic Association and senior fellow at the Peterson Institute for International Economics. He held the position as Chief Economist at the International Monetary Fund (IMF) in 2008-2015 and guided the fund through the global economic recession in these years. He is also Robert M. Solow Professor of Economics emeritus at MIT and the author of widely used textbooks at the undergraduate and graduate level.