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Journal of Economic Perspectives: Vol. 11 No. 1 (Winter 1997)
JEP Volume. 11, Issue 1 | 
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Reflections on the Natural Rate Hypothesis
Article Citation
Stiglitz, Joseph. 1997. "Reflections on the Natural Rate Hypothesis."
Journal of Economic Perspectives,
11(1): 3-10.
DOI: 10.1257/jep.11.1.3
DOI: 10.1257/jep.11.1.3
Abstract
Does the deviation of unemployment from some natural rate provide a robust and useful way to predict changes in the inflation rate? Can economists explain why the NAIRU changes over time? Is the NAIRU a useful way to frame policy discussions despite the uncertainty surrounding its precise level? The NAIRU hypothesis passes all three tests. Recent research shows that the NAIRU has fallen dramatically in the last decade. This paper refutes the need for a highly restrictive bias in macroeconomic policy because small deviations from the NAIRU will lead to only small, possibly easily correctable, changes in the inflation rate.
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Authors
Stiglitz, Joseph (US Council of Econ Advisors)
JEL Classifications
E24: Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
E31: Price Level; Inflation; Deflation
E31: Price Level; Inflation; Deflation
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