Working Paper: NBER ID: w8940
Authors: Laurence Ball; N. Gregory Mankiw
Abstract: This paper discusses the NAIRU -- the non-accelerating inflation rate of unemployment. It first considers the role of the NAIRU concept in business cycle theory, arguing that this concept is implicit in any model in which monetary policy influences both inflation and unemployment. The exact value of the NAIRU is hard to measure, however, in part because it changes over time. The paper then discusses why the NAIRU changes and, in particular, why it fell in the United States during the 1990s. The most promising hypothesis is that the decline in the NAIRU is attributable to the acceleration in productivity growth.
Keywords: No keywords provided
JEL Codes: E24; E31; J60
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| productivity growth (O49) | NAIRU (E24) |
| expected inflation (E31) | actual inflation (E31) |
| NAIRU (E24) | natural rate of unemployment (J64) |
| NAIRU (E24) | inflation (E31) |
| productivity growth (O49) | inflation-unemployment tradeoff (E31) |