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The behaviour of inflation and unemployment in the United States

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  • Vincent (Vincent Peter) Hogan

Abstract

Low rates of inflation have been recorded in the United States 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 behaviour of inflation. The main explanation for recent inflation performance appears to be that there have been favorable price shocks; in particular, the cost of imports has fallen sharply as the dollar has appreciated.

Suggested Citation

  • Vincent (Vincent Peter) Hogan, 2000. "The behaviour of inflation and unemployment in the United States," Working Papers 200016, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:wpaper:200016
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    File URL: http://hdl.handle.net/10197/329
    File Function: First version, 2000
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    References listed on IDEAS

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    1. Charles Adams & David T. Coe, 1990. "A Systems Approach to Estimating the Natural Rate of Unemployment and Potential Output for the United States," IMF Staff Papers, Palgrave Macmillan, vol. 37(2), pages 232-293, June.
    2. Cara S. Lown & Robert W. Rich, 1997. "Is there an inflation puzzle?," Economic Policy Review, Federal Reserve Bank of New York, vol. 3(Dec), pages 51-77.
    3. Robert J. Gordon, 1997. "The Time-Varying NAIRU and Its Implications for Economic Policy," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 11-32, Winter.
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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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