Reflections on the Natural Rate Hypothesis

Joseph Stiglitz

Journal of Economic Perspectives, 1997, vol. 11, issue 1, 3-10

Abstract: Does the deviation of unemployment from some natural rate provide a robust and useful way to predict changes in the inflation rate? Can economists explain why the NAIRU changes over time? Is the NAIRU a useful way to frame policy discussions despite the uncertainty surrounding its precise level? The NAIRU hypothesis passes all three tests. Recent research shows that the NAIRU has fallen dramatically in the last decade. This paper refutes the need for a highly restrictive bias in macroeconomic policy because small deviations from the NAIRU will lead to only small, possibly easily correctable, changes in the inflation rate.

JEL-codes: E24 E31 E52 (search for similar items in EconPapers)
Date: 1997
Note: DOI: 10.1257/jep.11.1.3
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Citations: View citations in EconPapers (204)

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