The NAIRU, Unemployment and Monetary Policy
AbstractThis paper examines the precision of conventional estimates of the NAIRU and the role of the NAIRU and unemployment in forecasting inflation. The authors find that, although there is a clear empirical Phillips relation, the NAIRU is imprecisely estimated, forecasts of inflation are insensitive to the NAIRU, and there are other leading indicators of inflation that are at least as good as unemployment. This suggests deemphasizing the NAIRU in public discourse about monetary policy and instead drawing on a richer variety of leading indicators of inflation.
CitationStaiger, Douglas, James H. Stock, and Mark W. Watson. 1997. "The NAIRU, Unemployment and Monetary Policy." Journal of Economic Perspectives, 11 (1): 33-49. DOI: 10.1257/jep.11.1.33
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
- E31 Price Level; Inflation; Deflation
- E52 Monetary Policy