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Prices, Wages and the U.S. NAIRU in the 1990s
BibTeX
@MISC{Staiger_prices,wages,
author = {Douglas Staiger and Douglas Staiger and James H. Stock and James H. Stock and Mark W. Watson and Mark W. Watson},
title = {Prices, Wages and the U.S. NAIRU in the 1990s},
year = {}
}
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Abstract
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 Keywords: Phillips Curve, natural rate, productivity JEL Classification: E31, E50 1.
Keyphrases
u.s. nairu univariate trend unemployment rate low rate productivity growth price expectation phillips curve strong real wage growth late 1990s fed policy government harvard university cambridge stock kennedy school watson department nh 03755-3514 james u.s. economy persistent beneficial supply shock annual state panel data many explanation douglas staiger department natural rate economics dartmouth college rockefeller hall productivity jel classification quarterly macro data various explanation price inflation wage phillips curve pricing power economics princeton university princeton past forty year
