Prices , Wages and the U . S . NAIRU in the 1990 s
نویسنده
چکیده
Using quarterly macro data and annual state panel data, we examine various explanations of the low rate of price inflation, strong real wage growth, and low rate of unemployment in the U.S. economy during the late 1990s. Many of these explanations imply shifts in the coefficients of price and wage Phillips curves. We find, however, that once one accounts for the univariate trends in the unemployment rate and in the rate of productivity growth, these coefficients are stable. This suggests that many explanations, such as persistent beneficial supply shocks, changes in firms’ pricing power, changes in price expectations arising from shifts in Fed policy, and changes in wage setting behavior miss the mark. Rather, we suggest that explanations of movements of wages, prices and unemployment over the 1990s, and indeed over the past forty years, must focus on understanding the univariate trends in the unemployment rate and in productivity growth and, perhaps, the relation between the two. Douglas Staiger Department of Economics Dartmouth College Rockefeller Hall, Room 322 Hanover, NH 03755-3514 James H. Stock Kennedy School of Government Harvard University Cambridge, MA 02138 Mark W. Watson Department of Economics Princeton University Princeton, NJ 08544
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