IDEAS home Printed from https://ideas.repec.org/p/boc/bocoec/414.html
   My bibliography  Save this paper

Accounting for the Recent Decline in the NAIRU

Author

Listed:
  • Robert G. Murphy

    (Boston College)

Abstract

This paper confirms that the unemployment rate associated with stable inflation, the so-called "NAIRU," probably has declined in recent years, after having risen sharply during the late 1970s and early 1980s. Although a demographic shift toward a less experienced workforce and an unexpected slowdown in trend productivity growth are able to explain the earlier rise in the NAIRU, a reversal of these effects does not adequately explain the timing of the apparent decline in the NAIRU during the 1990s. I propose that an additional element needs to be incorporated into the assessment. I argue that the degree of integration of regional labor markets across the United States has accelerated over the recent past, leading to a greater degree of synchronization in the pattern of regional labor market conditions and regional business-cycle conditions. I provide evidence of this greater synchronization, and suggest that it may have led to a drift downward in the NAIRU.

Suggested Citation

  • Robert G. Murphy, 1998. "Accounting for the Recent Decline in the NAIRU," Boston College Working Papers in Economics 414, Boston College Department of Economics.
    • Handle: RePEc:boc:bocoec:414
    as

    Download full text from publisher

    File URL: http://fmwww.bc.edu/EC-P/wp414.pdf
    File Function: main text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. David Card & Dean Hyslop, 1997. "Does Inflation "Grease the Wheels of the Labor Market"?," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 71-122, National Bureau of Economic Research, Inc.
    2. 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.
    3. Olivier Blanchard & Lawrence F. Katz, 1997. "What We Know and Do Not Know about the Natural Rate of Unemployment," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 51-72, Winter.
    4. 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.
    5. Archibald, G C, 1969. "The Phillips Curve and the Distribution of Unemployment," American Economic Review, American Economic Association, vol. 59(2), pages 124-134, May.
    6. Joseph Stiglitz, 1997. "Reflections on the Natural Rate Hypothesis," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 3-10, Winter.
    7. James L. Medoff & Katharine G. Abraham, 1981. "Unemployment, Unsatisfied Demand for Labor, and Compensation Growth in the United States, 1956-1980," NBER Working Papers 0781, National Bureau of Economic Research, Inc.
    8. Robert J. Gordon, 1981. "Inflation, Flexible Exchange Rates, and the Natural Rate of Unemployment," NBER Working Papers 0708, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Murphy, Robert G., 2014. "Explaining inflation in the aftermath of the Great Recession," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 228-244.
    2. Robert G. Murphy, 2016. "Why Has Inflation Been So Unresponsive to Economic Activity in Recent Years?," Boston College Working Papers in Economics 920, Boston College Department of Economics.
    3. Afful, Efua Amoonua, 2014. "Does Employment Protection Legislation Induce Structural Unemployment? Evidence from 15 OECD Countries," MPRA Paper 56875, University Library of Munich, Germany.
    4. Robert Murphy, 2016. "Explaining the Recent Behavior of Inflation in the United States," EcoMod2016 9550, EcoMod.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Douglas Staiger & James H. Stock & Mark W. Watson, 2001. "Prices, Wages and the U.S. NAIRU in the 1990s," NBER Working Papers 8320, National Bureau of Economic Research, Inc.
    2. Kromphardt, Jürgen & Logeay, Camille, 2007. "Changes in the Balance of Power Between the Wage and Price Setters and the Central Bank: Consequences for the Phillips Curve and the NAIRU," Kiel Working Papers 1354, Kiel Institute for the World Economy (IfW Kiel).
    3. Franz Wolfgang, 2001. "Neues von der NAIRU? / News from the NAIRU?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 221(3), pages 256-284, June.
    4. Beissinger, Thomas, 2003. "Strukturelle Arbeitslosigkeit in Europa : eine Bestandsaufnahme (Structural unemployment in Europe * an inventory)," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 36(4), pages 411-427.
    5. Bozani, Vasiliki & Drydakis, Nick, 2011. "Studying the NAIRU and its Implications," IZA Discussion Papers 6079, Institute of Labor Economics (IZA).
    6. Peter Isard & Douglas Laxton & Ann-Charlotte Eliasson, 1999. "Simple Monetary Policy Rules Under Model Uncertainty," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(4), pages 537-577, November.
    7. Vasiliki Bozani, 2011. "NAIRU, Unemployment and Post Keynesian Economics," Working Papers 1104, University of Crete, Department of Economics.
    8. Volker Wieland, "undated". "Monetary Policy and Uncertainty about the Natural Unemployment Rate," Computing in Economics and Finance 1997 11, Society for Computational Economics.
    9. Linzert, Tobias, 2005. "The Unemployment Inflation Trade-Off in the Euro Area," IZA Discussion Papers 1699, Institute of Labor Economics (IZA).
    10. Antonella Palumbo, 2008. "I metodi di stima del PIL potenziale tra fondamenti di Teoria economica e Contenuto empirico," Departmental Working Papers of Economics - University 'Roma Tre' 0092, Department of Economics - University Roma Tre.
    11. Rodríguez, Gabriel, 2010. "Using A Forward-Looking Phillips Curve to Estimate the Output Gap in Peru," Review of Applied Economics, Lincoln University, Department of Financial and Business Systems, vol. 6(1-2), pages 1-13, April.
    12. Carl Chiarella & Peter Flaschel, 1999. "Disequilibrium Growth Theory: Foundations, Synthesis, Perspectives," Working Paper Series 85, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    13. Chiarini, Bruno & Piselli, Paolo, 2001. "Identification and dimension of the NAIRU," Economic Modelling, Elsevier, vol. 18(4), pages 585-611, December.
    14. Basistha, Arabinda & Nelson, Charles R., 2007. "New measures of the output gap based on the forward-looking new Keynesian Phillips curve," Journal of Monetary Economics, Elsevier, vol. 54(2), pages 498-511, March.
    15. Partridge, Mark D. & Dalenberg, Douglas R., 2000. "An empirical analysis of state labor markets: has worker insecurity shifted wages in the 1990s?," The Quarterly Review of Economics and Finance, Elsevier, vol. 40(3), pages 303-323.
    16. Hein, Eckhard, 2003. "Die NAIRU: Eine post-keynesianische Interpretation," WSI Working Papers 113, The Institute of Economic and Social Research (WSI), Hans Böckler Foundation.
    17. Backhouse, Roger E. & Forder, James & Laskaridis, Christina, 2023. "The natural rate of unemployment and the NAIRU," European Economic Review, Elsevier, vol. 159(C).
    18. Dimitris Hatzinikolaou & Pantelis Kammas, 2010. "Firing Restrictions, Government Growth, Immigration, and the NAIRU: Evidence from Fifteen OECD Countries," LABOUR, CEIS, vol. 24(4), pages 441-455, December.

    More about this item

    Keywords

    Nairu; Phillips Curve; Inflation; Natural Rate;
    All these keywords.

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:boc:bocoec:414. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christopher F Baum (email available below). General contact details of provider: https://edirc.repec.org/data/debocus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.