When all are NAIRU: hysteresis and behavioural inertia

Abstract

Smyh and Easaw (2001) use a fully flexible ratchet model to estimate the US NAIRU. However, such flexible notions of NAIRU cleanse the natural rate hypothesis of all policy and theoretical relevance. Six successive years of unemployment rates below these estimated NAIRUs produce declining inflation, not the accelerating inflation promised by the natural rate hypothesis. An alternative model of inflation dynamics, the behavioural inertia hypothesis, is offered and shown to fit the US inflation-unemployment relation quite well. This behavioural inertia model is consistent with the recent US experience of low and falling unemployment accompanied by low and falling rates of inflation.

Integrating the Empirical Tests of the Natural Rate Hypothesis: A Meta‐Regression Analysis

“…2. Even when the NAIRU is permitted to be fully flexible, freely adjusting to recent events, one can find unemployment rates below the fully flexible NAIRU year after year after year, and yet inflation falls (Stanley 2002). 3.…”

Does economics add up? An introduction to meta-regression analysis

“…When the unemployment rate is nonstationary, there is no NAIRU towards which the unemployment is being pulled. Rather, it is the perfectly flexible NAIRU that is adjusting to past unemployment rates (Stanley 2002;2004). Overall, there is clear evidence of nonstationarity among the 99 estimates of unemployment persistence identified by Stanley (2004).…”

AB Ülkeleri ve Türkiye İşgücü Piyasasında Histeri Etkisi: RATCHET Modeli Analizi

“…Ancak ABD ve AB ülkelerinde yaşanan düşük enflasyon oranlarına karşın yüksek oranda işsizlik olgusuna ek olarak ücret enflasyonunun ortaya çıkması doğal işsizlik oranının varlığına olan inancı sarsmış ve doğal işsizlik oranına alternatif bir kavram Enflasyonu hızlandırmayan işsizlik oranı (NAIRU) ortaya atılmıştır. NAIRU kavramı 1975 yılında Franco Modigliani ve Lucas Papademos tarafından doğal işsizlik oranı hipotezini geliştirmek için kullanılmıştır (Lordoğlu ve Özkaplan, 2005: 428 (Stanley, 2002) ifade etmektedir.…”