Explaining the Recent Behavior of Inflation and Unemployment in the United States

Author/Editor:

Vincent Hogan

Publication Date:

September 1, 1998

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Low rates of inflation have been recorded in recent years, despite a decline in the unemployment rate. This phenomenon could be the result of a series of transitory shocks or of a permanent change in the structure of the economy leading to a lower NAIRU. The paper suggests that, while the NAIRU may have fallen slightly, it has not fallen by an amount sufficient to explain the recent behavior of inflation. A leading explanation for recent inflation performance appears to be favorable price shocks; in particular, the cost of imports has fallen sharply as the dollar has appreciated.

Series:

Working Paper No. 1998/145

Subject:

Import prices Inflation Labor Labor costs Prices Unemployment Unemployment rate

English

Publication Date:

September 1, 1998

ISBN/ISSN:

9781451856514/1018-5941

Stock No:

WPIEA1451998

Pages:

17

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