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Restructuring, the NAIRU, and the Phillips curve

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  • Geoffrey M.B. Tootell

Abstract

Recent news stories about corporate downsizing have increased concerns that the labor market is being permanently restructured. The press implicitly, and some economists explicitly, have concluded that this "restructuring" in the labor market has increased the rate of unemployment that is consistent with stable inflation. This rate is known as the NAIRU, the non-accelerating-inflation rate of unemployment, the unemployment rate below which inflation tends to rise, and above which inflation tends to fall. ; This article examines both macroeconomic data and more disaggregated data in search of evidence that the NAIRU has increased. The author finds that neither type of data supports a conclusion that NAIRU has risen in the past few years. He concludes with a brief assessment of the difficulties of estimating the NAIRU.

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Bibliographic Info

Article provided by Federal Reserve Bank of Boston in its journal New England Economic Review.

Volume (Year): (1994)
Issue (Month): Sep ()
Pages: 31-44

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Handle: RePEc:fip:fedbne:y:1994:i:sep:p:31-44

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Keywords: Unemployment ; Phillips curve;

References

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  1. Olivier J. Blanchard, 1984. "The Lucas Critique and the Volcker Deflation," NBER Working Papers 1326, National Bureau of Economic Research, Inc.
  2. Kim B. Clark & Lawrence H. Summers, 1979. "Labor Market Dynamics and Unemployemnt: A Reconsideration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 10(1), pages 13-72.
  3. George L. Perry, 1970. "Changing Labor Markets and Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 1(3), pages 411-448.
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Cited by:
  1. Giovanni P. Olivei & Michelle L. Barnes, 2004. "Inside and Outside Bounds: Threshold Estimates of the Phillips Curve," Econometric Society 2004 Australasian Meetings 295, Econometric Society.
  2. Sharon Kozicki, 2001. "Why do central banks monitor so many inflation indicators?," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 5-42.
  3. Francisco J. Ruge-Murcia, 2001. "Inflation Targeting Under Asymmetric Preferences," Banco de Espa�a Working Papers 0106, Banco de Espa�a.
  4. RUGE-MURCIA, Francisco J., 2002. "Does the Barro-Gordon Model Explain the Behavior of US Inflation? a Reexamination of the Empirical Evidence," Cahiers de recherche, Universite de Montreal, Departement de sciences economiques 2002-07, Universite de Montreal, Departement de sciences economiques.
  5. Lynn Elaine Browne, 1999. "U.S economic performance: good fortune, bubble, or new era?," New England Economic Review, Federal Reserve Bank of Boston, Federal Reserve Bank of Boston, issue May, pages 3-20.
  6. Cara S. Lown & Robert W. Rich, 1997. "Is there an inflation puzzle?," Research Paper, Federal Reserve Bank of New York 9723, Federal Reserve Bank of New York.
  7. Robert W. Rich & Donald Rissmiller, 2001. "Structural change in U.S. wage determination," Staff Reports, Federal Reserve Bank of New York 117, Federal Reserve Bank of New York.
  8. Debelle, Guy & Vickery, James, 1998. "Is the Phillips Curve a Curve? Some Evidence and Implications for Australia," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 74(227), pages 384-98, December.
  9. Douglas Staiger & James H. Stock & Mark W. Watson, 1997. "The NAIRU, Unemployment and Monetary Policy," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 33-49, Winter.
  10. Douglas O. Staiger & James H. Stock & Mark W. Watson, 1997. "How Precise Are Estimates of the Natural Rate of Unemployment?," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 195-246 National Bureau of Economic Research, Inc.
  11. Geoffrey M.B. Tootell, 1998. "Globalization and U.S. inflation," New England Economic Review, Federal Reserve Bank of Boston, Federal Reserve Bank of Boston, issue Jul, pages 21-33.
  12. Renshaw, Edward, 1996. "The natural rate of unemployment: Can it be estimated with any confidence?," Journal of Policy Modeling, Elsevier, Elsevier, vol. 18(2), pages 203-215, April.

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