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Inflation goals: guidance from the labor market?

Author

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  • Erica L. Groshen
  • Mark E. Schweitzer

Abstract

As inflation rates in the United States decline, analysts are asking if there are economic reasons to hold the rates at levels above zero. A study of inflation's effects on the labor market suggests that low rates of inflation do help the economy to adjust to changes in labor supply and demand. When inflation's disruptive effects are balanced against this benefit, however, the labor market justification for pursuing a positive long-term inflation goal effectively disappears.

Suggested Citation

  • Erica L. Groshen & Mark E. Schweitzer, 1997. "Inflation goals: guidance from the labor market?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 3(Dec).
  • Handle: RePEc:fip:fednci:y:1997:i:dec:n:v.3no.15
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    References listed on IDEAS

    as
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    5. Lawrence Slifman & Carol Corrado, 1999. "Decomposition of Productivity and Unit Costs," American Economic Review, American Economic Association, vol. 89(2), pages 328-332, May.
    6. Brian Motley, 1992. "Index numbers and the measurement of real GDP," Economic Review, Federal Reserve Bank of San Francisco, pages 3-13.
    7. Charles Steindel, 1997. "Are there good alternatives to the CPI?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 3(Apr).
    8. Marshall B. Reinsdorf, 1998. "Formula Bias And Within-Stratum Substitution Bias In The U.S. CPI," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 175-187, May.
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    Keywords

    Inflation (Finance) ; Labor market;

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