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http://arks.princeton.edu/ark:/88435/pr1xj6k| Abstract: | The rate of inflation fell far less over the period 2007-2013 than in the period 1979-1985 despite similar large increases in the unemployment rate. This paper asks why. Possible explanations include a change in the persistence of inflation, changes in NAIRU, and other shocks. A change in the persistence of inflation, with inflation more anchored in the period 2007-2013 than in the period 1979-1985, is found to be important. The level and change in the NAIRU cannot be precisely estimated, but the data suggest an increase of nearly 1 percentage point since 2007. |
| Publication Date: | May-2014 |
| Citation: | Watson, Mark W. (2014). Inflation Persistence, the NAIRU, and the Great Recession. American Economic Review, 104 (5), 31 - 36. doi:10.1257/aer.104.5.31 |
| DOI: | doi:10.1257/aer.104.5.31 |
| ISSN: | 0002-8282 |
| Pages: | 31 - 36 |
| Type of Material: | Journal Article |
| Journal/Proceeding Title: | American Economic Review |
| Version: | Final published version. Article is made available in OAR by the publisher's permission or policy. |
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