Accounting for the Recent Decline in the NAIRU

Murphy, Robert

Accounting for the Recent Decline in the NAIRU

No 414, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: This paper confirms that the unemployment rate associated with stable inflation, the so-called "NAIRU," probably has declined in recent years, after having risen sharply during the late 1970s and early 1980s. Although a demographic shift toward a less experienced workforce and an unexpected slowdown in trend productivity growth are able to explain the earlier rise in the NAIRU, a reversal of these effects does not adequately explain the timing of the apparent decline in the NAIRU during the 1990s. I propose that an additional element needs to be incorporated into the assessment. I argue that the degree of integration of regional labor markets across the United States has accelerated over the recent past, leading to a greater degree of synchronization in the pattern of regional labor market conditions and regional business-cycle conditions. I provide evidence of this greater synchronization, and suggest that it may have led to a drift downward in the NAIRU.

Keywords: Nairu; Phillips Curve; Inflation; Natural Rate (search for similar items in EconPapers)
JEL-codes: E0 E3 E6 (search for similar items in EconPapers)
Pages: 19 pages
Date: 1998-11-09
New Economics Papers: this item is included in nep-ltv
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published, Business Economics, 1999, 34, 33-38.

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Persistent link: https://EconPapers.repec.org/RePEc:boc:bocoec:414

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