Explaining the Recent Behavior of Inflation and Unemployment in the United States

Vincent Hogan

No 1998/145, IMF Working Papers from International Monetary Fund

Abstract: Low rates of inflation have been recorded in recent years, despite a decline in the unemployment rate. This phenomenon could be the result of a series of transitory shocks or of a permanent change in the structure of the economy leading to a lower NAIRU. The paper suggests that, while the NAIRU may have fallen slightly, it has not fallen by an amount sufficient to explain the recent behavior of inflation. A leading explanation for recent inflation performance appears to be favorable price shocks; in particular, the cost of imports has fallen sharply as the dollar has appreciated.

Keywords: WP; natural rate of unemployment; Phillips curve; variable; inflation variable; overpredicts inflation; Inflation; inflation performance; overpredict inflation; reason inflation; unemployment gap; NAIRU equation; Import prices; Unemployment; Unemployment rate; Labor costs (search for similar items in EconPapers)
Pages: 17
Date: 1998-09-01
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Citations: View citations in EconPapers (23)

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