Sunday, June 18, 2006

The Non-Accelerating Inflation Range of Unemployment

Hopefully my last two posts on the subject have made it clear that I am ready, willing, and able to defend the theory of a Non-Accelerating Inflation Rate of Unemployment, not just as “the best of a bad lot” but as a worthwhile theory in and of itself. Having declared victory, I am now getting out. Herewith I renounce the Non-Accelerating Inflation Rate of Unemployment. Le NAIRU est mort.

Vive le NAIRU! As we bury the theory, we need not also bury the acronym. Rather, let me suggest that there is a range of unemployment rates that is compatible with stable inflation: the Non-Accelerating Inflation Range of Unemployment. I’m not sure who coined that phrase, but I associate it with Harvard labor economist James Medoff. (A Google search on the phrase turns up nothing of interest.)

If the unemployment rate goes above the NAIRU range, the inflation rate declines. If it goes below, the inflation rate rises. If it stays within the range, the inflation rate remains the same, except for random changes and responses to external shocks.

It is a theory with which, it seems to me, almost everyone will eventually have to agree. It is proven by thought experiment and historical experience. Even the most ardent “Old Keynesian” or real business cycle advocate will have to acknowledge that, if we push unemployment far enough below the full-employment level, the inflation rate will start to rise fairly rapidly. To put it conversely, an inflationary monetary policy will initially push unemployment below the full-employment level. Some may deny the possibility of pushing unemployment below the full-employment level, but it seems to me that the late 1960s provide an example.

On the other side, even the most ardent Laxtonite advocate of the convex Phillips curve will have to acknowledge that, if we push unemployment high enough, we will get fairly rapid disinflation – or conversely, that there are limits to the unemployment effects of even the most draconian disinflaitonary (or deflationary) policy. The early 1980s would seem to provide an example. I might also cite the rapidity with which deflation materialized during the early 1930s, as well as the relatively small absolute unemployment increase in 1990s Japan.

And there is surely some range of unemployment in the middle that is compatible with stable inflation. Traditional NAIRU people may still claim that the range is degenerate, just a single point, but the experience of the late 1990s makes that claim very difficult to maintain.

What I’m suggesting is a Phillips curve that is convex on the left side and concave on the right side, like the shape depicted below. For extremely low unemployment rates – near zero – we are in hyperinflationary territory. As we consider gradually higher unemployment rates, the inflation rate first falls quickly toward “ordinary high inflation,” then more slowly down to the expected inflation rate, where it essentially remains over a certain range. Subsequently, as we consider gradually higher unemployment rates above the NAIRU, the inflation rate falls slowly, then more quickly, then very quickly into the deflation zone.

Labels: , , , , ,

11 Comments:

Blogger Gabriel Mihalache said...

Your posts are awesome! Keep it up.

As far as I know "NAIRU" was introduced by Tobin and Keynesian friends as a replacement for Friedman's "natural rate" label which was deemed loaded with unintended connotations.

Sun Jun 18, 05:44:00 PM EDT  
Anonymous mv=py said...

"If the unemployment rate goes above the NAIRU range, the inflation rate declines."

Look, knzn, for goodness sake, the theory you are proposing is completely vacuous. You are saying that, well, theres a range of unemployment, below which inflation will start rising. But, we dont really no what the range is. And, whats more, the range can change. I mean, what kinda theory is *this*. That said, I admit, the *range* thing is better than a *point*.

"I might also cite the rapidity with which deflation materialized during the early 1930s\"

But, deflation stopped after a while. Given the nairu gap, deflation was mild. Thats what George Akerlof says anyhow. He takes this as a refutation of the nairu thing. And from reading the last paragraph, this refutes your theory too. Look at Georges paper with Dickens, Perry on the greasing the wheels issue. This seems to be very similar in spirit to what youre doing here.

Mon Jun 19, 05:03:00 AM EDT  
Blogger knzn said...

mvpy (Is it mvpy or mv=py?), the theory is no more vacuous than any other theory in the process of being fleshed out. (I presume nobody else has fleshed it out, or my Google search would have been more successful.) In the earlier posts, I discussed a theory of NAIRU shifts – a theory which fits the data quite well even in its dumb linear version. I haven’t thought yet about how to apply that theory to the non-linear NAIRU range theory, but it should be possible. So when you say, “we don’t really know what the range is,” that only means that the research isn’t finished, not that it’s pointless.

I cited the rapidity of onset of deflation during the 1930s, which was much faster than a Laxtonite would expect. You rightly point out that the subsequent progress of deflation was much slower than even a linear NAIRU guy would expect. The reason, presumably, is that the long-run Phillips curve is downward-sloping in that range. (This is the implication of the “greasing the wheels” theory.) Of course any kind of NAIRU or NAIRU theory only works to the extent that long-run Phillips curve can be approximated by a vertical line.

It occurs to me though, that I was probably wrong to sneak the assumption of symmetry into my picture. The convexity on the left side is almost certainly more severe than the concavity on the right side. (If one believed seriously in a linear Phillips curve, one would have to believe that it became infinitely convex – a kink – when it got to zero. It would also have to become infinitely concave when it got to 100%, but that’s very far away.)

Mon Jun 19, 10:46:00 AM EDT  
Anonymous Anonymous said...

豆豆聊天室 aio交友愛情館 2008真情寫真 2009真情寫真 aa片免費看 捷克論壇 微風論壇 大眾論壇 plus論壇 080視訊聊天室 情色視訊交友90739 美女交友-成人聊天室 色情小說 做愛成人圖片區 豆豆色情聊天室 080豆豆聊天室 小辣妹影音交友網 台中情人聊天室 桃園星願聊天室 高雄網友聊天室 新中台灣聊天室 中部網友聊天室 嘉義之光聊天室 基隆海岸聊天室 中壢網友聊天室 南台灣聊天室 南部聊坊聊天室 台南不夜城聊天室 南部網友聊天室 屏東網友聊天室 台南網友聊天室 屏東聊坊聊天室 雲林網友聊天室 大學生BBS聊天室 網路學院聊天室 屏東夜語聊天室 孤男寡女聊天室 一網情深聊天室 心靈饗宴聊天室 流星花園聊天室 食色男女色情聊天室 真愛宣言交友聊天室 情人皇朝聊天室 上班族成人聊天室 上班族f1影音視訊聊天室 哈雷視訊聊天室 080影音視訊聊天室 38不夜城聊天室 援交聊天室080 080哈啦聊天室 台北已婚聊天室 已婚廣場聊天室 夢幻家族聊天室 摸摸扣扣同學會聊天室 520情色聊天室 QQ成人交友聊天室 免費視訊網愛聊天室 愛情公寓免費聊天室 拉子性愛聊天室 柔情網友聊天室 哈啦影音交友網 哈啦影音視訊聊天室 櫻井莉亞三點全露寫真集 123上班族聊天室 尋夢園上班族聊天室 成人聊天室上班族 080上班族聊天室 6k聊天室 粉紅豆豆聊天室 080豆豆聊天網 新豆豆聊天室 080聊天室 免費音樂試聽 流行音樂試聽 免費aa片試看A片 免費a長片線上看 色情貼影片 免費a長片 本土成人貼圖站 大台灣情色網 台灣男人幫論壇 A圖網 嘟嘟成人電影網 火辣春夢貼圖網 情色貼圖俱樂部 台灣成人電影 絲襪美腿樂園 18美女貼圖區 柔情聊天網 707網愛聊天室聯盟 台北69色情貼圖區 38女孩情色網 台灣映像館 波波成人情色網站 美女成人貼圖區 無碼貼圖力量 色妹妹性愛貼圖區 日本女優貼圖網 日本美少女貼圖區 亞洲風暴情色貼圖網 哈啦聊天室 美少女自拍貼圖 辣妹成人情色網 台北女孩情色網 辣手貼圖情色網 AV無碼女優影片 男女情色寫真貼圖 a片天使俱樂部 萍水相逢遊戲區 平水相逢遊戲區 免費視訊交友90739 免費視訊聊天 辣妹視訊 - 影音聊天網 080視訊聊天室 日本美女肛交 美女工廠貼圖區 百分百貼圖區 亞洲成人電影情色網 台灣本土自拍貼圖網 麻辣貼圖情色網 好色客成人圖片貼圖區 711成人AV貼圖區 台灣美女貼圖區 筱萱成人論壇 咪咪情色貼圖區 momokoko同學會視訊 kk272視訊 情色文學小站 成人情色貼圖區 嘟嘟成人網 嘟嘟情人色網 - 貼圖區 免費色情a片下載 台灣情色論壇 成人影片分享 免費視訊聊天區 微風 成人 論壇 kiss文學區 taiwankiss文學區

Wed Apr 01, 07:52:00 AM EDT  
Anonymous Anonymous said...

福~
「朵
語‧,最一件事,就。好,你西.............................................................................................................
..................

Wed Apr 01, 09:55:00 AM EDT  
Blogger . said...

酒店喝酒,禮服店,酒店小姐,酒店領檯,便服店,鋼琴酒吧,酒店兼職,酒店兼差,酒店打工,伴唱小姐,暑假打工,酒店上班,酒店兼職,ktv酒店,酒店,酒店公關,酒店兼差,酒店上班,酒店打工,禮服酒店,禮服店,酒店小姐,酒店兼差,暑假打工,酒店經紀,台北酒店,禮服店 ,酒店小姐,酒店經紀,酒店兼差,寒假打工,酒店小姐,台北酒店,禮服店 ,酒店小姐,酒店經紀,酒店兼差,暑假打工,酒店小姐,台北酒店,禮服店 ,酒店小姐,酒店經紀,酒店兼差,寒假打工,台北酒店,禮服店 ,酒店小姐,酒店經紀,酒店兼差,暑假打工,酒店小姐,台北酒店,禮服店 ,酒店小姐,酒店兼差,暑假打工,酒店小姐,台北酒店,禮服店 ,酒店小姐,酒店經紀,酒店兼差,寒假打工,酒店小姐,台北酒店,禮服店 ,酒店小姐,酒店經紀,酒店兼差,暑假打工,酒店小姐,台北酒店,禮服店 ,酒店小姐,酒店經紀,酒店兼差,寒假打工,酒店小姐,台北酒店,禮服店 ,酒店小姐,酒店經紀,酒店兼差,暑假打工,酒店小姐,禮服店 ,酒店小姐,酒店經紀,酒店兼差,寒假打工,酒店小姐,禮服店 ,酒店小姐,酒店經紀,酒店兼差,暑假打工,酒店小姐,禮服店 ,酒店小姐,酒店經紀,酒店兼差,寒假打工,酒店小姐,禮服店 ,酒店小姐,酒店經紀,酒店兼差,暑假打工,酒店小姐,酒店傳播,酒店經紀人,酒店,酒店,酒店,酒店 ,禮服店 , 酒店小姐,酒店經紀,酒店兼差,暑假打工,招待所,酒店小姐,酒店兼差,寒假打工,酒店上班,暑假打工,酒店公關,酒店兼職,禮服店 , 酒店小姐 ,酒店經紀 ,酒店兼差,暑假打工,酒店,酒店,酒店經紀,酒店領檯 ,禮服店 ,酒店小姐 ,酒店經紀 ,酒店兼差,暑假打工, 酒店上班,禮服店 ,酒店小姐 ,酒店經紀 ,酒店兼差,暑假打工, 酒店上班,禮服店 ,酒店小姐 ,酒店經紀 ,酒店兼差,暑假打工, 酒店上班,酒店經紀,酒店經紀,酒店經紀

Tue Apr 21, 07:17:00 PM EDT  
Blogger how to buy air shoes said...

Some new style Puma Speed is in fashion this year. chaussure puma is Puma Shoes in french. Many france like seach “chaussure sport” by the internet when they need buy the Puma shoes or buy the nike max shoes.The information age is really convenient. By the way ,the puma CAT is really good chaussures puma ,don’t forget buy the puma mens shoes and nike air max ltd by the internet when you need them . Do you know Nike Air Shoes is a best Air Shoes .

Spring is coming, and how to choose the polo shirts is the main concern of many people. ralph lauren polo shirts is a classic type and reliable. ed hardy clothing is more in line with the aesthetic ideas of young people, so many young people filled with a variety of ed hardy clothes in their wardrobes. New style ed hardy womens shirt match the new style ed hardy sunglasses , it is a good idea.
Do you think this season is not for ugg boots ? maybe yes .but this season is best time that can buy the cheap ugg boots. Many sellers are selling discounted. Do not miss . Please view my blog and fc2 blog .thank you .

Tue May 19, 06:25:00 AM EDT  
Blogger wow power leveling said...

Faint hint of the love of friendship

Faint hint of the love of friendship. There is a friend, I think that is a cheap wow gold kind of love and friendship between the feelings between, you will occasionally miss a time to silence him, reminds him, the warm heart, a beautiful, a moving. Sad and worried at the time, you will think of him, you hope that he can in your side, give you comfort and buy wow power leveling understanding to you, and you never talk to him, are you afraid of their own grief that would preclude him from peaceful life.

You will be a song, a color, think of him, think of my wow gold his sincerity, he reminds me of the dedication, his mind had gone through the ups and downs together. With such a friend, you will treasure their lives and love their own lives, because you know I hope you had a good, he would like you to take care of themselves properly, and then to meet, he cheapest wow power leveling would like you to tell him you very happy.

That the concept of secularism, in your mind, because his replica replica rolex presence has become pale and weak, you are only in the depths of the bottom of my heart for this man set up a small space, stick with that quietly happy memories, from the the very beginning you know that you will not have any love, it seems that talk about love on the desecration CHEAP wow power level of this emotion, this can only be a friendship. This is how in the end all about? You want to for many years, but no clue.

You seldom have contacts in this long life, you meet the door may be only a few of the ten thousandth time, but in each other's hearts retain a miss, one asked, even if he went to the ends of the earth, even after many, many years, even BUY power leveling when the meet again, has long been a non-object is not, you still remember back as a profound, and this has been sufficient.

Sometimes life will calm a dry, maybe you will fall into the dry I replica rolex replica did this, perhaps what you do not have love, perhaps early HUAFA, full sideburns pale, but with such a friend, in the your life will ripple slightly, a little color, do you think of him. He remembered the quiet, perhaps the Health and cheap lotro gold the WHO will not forget.

Am grateful for you in this world, there is such a person, he is replica rolex not around you, he did not do anything for you, but you hope that he would have been very good, long life, happiness well-being ... ...

Am glad you had a feeling like that, pure and long, in this complex CHEAPEST power leveling world, there are such a friend, it is worth to cheap rs gold lbless you to miss ... ...

Wed Jun 10, 12:31:00 AM EDT  
Anonymous Anonymous said...

コンタクトレンズ
国内格安航空券
おまとめローン
留学
インプラント
CloneDVD

Mon Jul 13, 12:48:00 AM EDT  
Anonymous Anonymous said...

クレジットカード 現金化
会社設立
キャッシング
ダンボール
アダルトDVD
水 通販
アルカリイオン水

Mon Jul 13, 12:48:00 AM EDT  
Blogger dfadf said...

Microsoft Office
Office 2010
Microsoft Office 2010
Office 2010 key
Office 2010 download
Office 2010 Professional
Microsoft outlook
Outlook 2010
Windows 7
Microsoft outlook 2010

Tue Nov 02, 01:21:00 AM EDT  

Post a Comment

Links to this post:

Create a Link

<< Home