What's Behind the Decline in the NAIRU?No 435, Boston College Working Papers in Economics from Boston College Department of Economics Abstract: This paper assesses the apparent decline during the 1990s in the unemployment rate associated with stable inflation³the so-called "NAIRU." The paper argues that supply shocks alone are not sufficient to account for this decline and that changes in labor markets are in part responsible. I consider several popular labor-market explanations for the decline. Although a demographic shift toward a more experienced workforce, a growing use of temporary employees, and a skyrocketing prison population probably have contributed to the decline in the NAIRU, they do not adequately explain the timing of an acceleration in that decline during the mid-1990s. I propose an alternative explanation based on evidence showing an increase during the 1990s in the synchronization of regional economic conditions. In particular, I suggest that greater uniformity in economic conditions across regions during the current business expansion has limited spillovers of wage and price pressures from one region of the country to another, thereby lowering the national NAIRU. Keywords: NAIRU; Phillips Curve; Inflation; Natural Rate (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: http://EconPapers.repec.org/RePEc:boc:bocoec:435 Access Statistics for this paper More papers in Boston College Working Papers in Economics from Boston College Department of Economics |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
Swedish Business School at Örebro University.