What's Behind the Decline in the NAIRU?
Robert Murphy ()
No 435, Boston College Working Papers in Economics from Boston College Department of Economics
This paper assesses the apparent decline during the 1990s in the unemployment rate associated with stable inflation≥the 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)
JEL-codes: E0 E3 J3 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab
References: Add references at CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Published in The Economic Outlook for 2000, S. Hymans., ed., 2000, 135-176
Downloads: (external link)
http://fmwww.bc.edu/EC-P/wp435.pdf main text (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://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 Boston College, 140 Commonwealth Avenue, Chestnut Hill MA 02467 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F Baum ().