Hey,
Has anybody checked out the article by these Brookings folks about the
changing face of NAIRU? It was mentioned a week or ten days ago in a WSJ
article. I'm just reading through the abstract, but it seems that the basic
idea here is that NAIRU changes depending on how wagemakers use information
about inflation. Their idea is that wagemakers (and employees) tend to
include inflationary expectations in their wage demands/offers only as
inflation goes up. (ie. they don't act fully rationally, only
"near-rationally".) One implication of this seems to be that, below a
certain threshold, inflation is only secondarily wage-push inflation, and so
must come from other sources. I'm supposing this would mean a change in Fed
policy below some threshold inflation rate or above some (otherwise "low")
unemployment rate. It doesn't seem to me, as the abstract suggests, to
question the natural rate itself.
The link below is for the abstract only.
Christian
http://www.brook.edu/views/papers/dickens/20000602.htm
