Is inflation dead?
In the past few years the United States has enjoyed the unique economic duet of very low unemployment and declining price inflation. For decades, we have come to associate tight labor markets with accelerating wages and prices. But in 1997, the unemployment rate sank below 5 percent, and neither wage nor price inflation became a problem. Have our inflation processes fundamentally changed for the better? Are we in a new era of permanently better economic performance due to new behavior by our citizens? Or are we simply enjoying good luck in the form of positive supply shocks? A careful reading of the full inflation story reveals that nominal wage inflation has been subdued by exceptionally modest price inflation, according to the author. Real, or price-adjusted, wage inflation has been increasing in response to low unemployment, just as in past decades. Price inflation has been held down by a set of "supply shocks," including a strong dollar, falling energy prices, and a cost-reducing regime shift in the healthcare industry. Inflation is not dead, and as supply shocks shift to neutral or worse, tight labor markets will create a traditional inflation problem.
Volume (Year): (1999)
Issue (Month): Jan ()
|Contact details of provider:|| Postal: 600 Atlantic Avenue, Boston, Massachusetts 02210|
Web page: http://www.bos.frb.org/
More information through EDIRC
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Otto Eckstein & Thomas A. Wilson, 1962. "The Determination of Money Wages in American Industry," The Quarterly Journal of Economics, Oxford University Press, vol. 76(3), pages 379-414.
- Roger E. Brinner, 1977. "The Death of the Phillips Curve Reconsidered," The Quarterly Journal of Economics, Oxford University Press, vol. 91(3), pages 389-418.
- Robert J. Gordon, 1972. "Wage-Price Controls and the Shifting Phillips Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 3(2), pages 385-430.
When requesting a correction, please mention this item's handle: RePEc:fip:fedbne:y:1999:i:jan:p:37-49. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Catherine Spozio)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.