I have very little time today to write, first a very long flight and then preparation for a major release tomorrow of our latest Employment Vulnerability Index (EVI), which measures the risk of localised communities in Australia of unemployment as the economy slows. We have a very neat mapping tool and I will write about that tomorrow once the press launch occurs (first thing). But I am also working on various other papers and, as usual, have become immersed in the Phillips curve. I remember when I first started by PhD at the University of Manchester in the early 1980s, my then supervisor said to me on the first day that once I started modelling inflation and unemployment (the Phillips curve) I would never stop. Among other truths he uttered during my time in that dank part of the world that statement was spot on. Every now and then I return to the topic and update, revise, re-create and (sometimes) even innovate. So today’s blog is just a collection of snippets of the more accessible things I have been working on over the last few days. It starts with a graph that appeared in the IMF’s World Economic Outlook in April 2013. Then follow the graphs. Conclusion: The NAIRU as estimated is a very dangerous concept for the well-being of ordinary people.
Bill Mitchell – billy blog
Why we have to learn about the NAIRU (and reject it)
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the Charles Darwin University, Northern Territory, Australia
Why we have to learn about the NAIRU (and reject it)
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the Charles Darwin University, Northern Territory, Australia
2 comments:
Not according to Baker and Berstein: "Why
were the late 1990s different? The answer is that in the late 1990s, in addition to growth, we also had full employment. If the Federal Reserve had raised interest rates to slow the economy and prevent the unemployment rate from falling below the accepted range for the NAIRU – the “noninflationary” unemployment rate – the deficit in 2000 would likely have been close to the level predicted by CBO, and we would not have seen budget surpluses. Instead, the Fed allowed the unemployment rate to fall below generally accepted estimates of the NAIRU."
Long live the NAIRU!!!!!
I agree with Matt. NAIRU is defined in my dictionary of economics (to over-simplify a bit) as the idea that as demand rises, a point comes where the economy reaches capacity, and inflation kicks in in a serious way. That’s a very simple and obviously valid concept. I can’t see what Bill Mitchell has against it, particularly as he has his own phrase to describe the same phenomenon: “the inflation barrier”.
Moreover, MMTers keep repeating the point that shortage of money is not a constraint for a monetarily sovereign country, but inflation IS A CONSTRAINT. Quite right.
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