Hidden Bibliographic Details
| Other authors / contributors: | International Monetary Fund. Research Department, issuing body.
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| ISBN: | 1283557401
9781283557405
1451891717
9781451891713
1462368247
9781462368242
1452795703
9781452795706
9786613869852
6613869856
9781451921717
1451921713
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| ISSN: | 2227-8885
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| Notes: | "February 1998."
Includes bibliographical references (pages 27-28).
Restrictions unspecified
Electronic reproduction. [Place of publication not identified] : HathiTrust Digital Library, 2014.
Master and use copy. Digital master created according to Benchmark for Faithful Digital Reproductions of Monographs and Serials, Version 1. Digital Library Federation, December 2002. http://purl.oclc.org/DLF/benchrepro0212
English.
digitized 2014 HathiTrust Digital Library committed to preserve
Print version record.
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| Summary: | Recent empirical contributions to the monetary policy literature have argued that the short-run Phillips curve in several developed countries is moderately convex, such that at any given point on the curve, the inflation increase associated with an incremental decline in the unemployment rate exceeds the inflation decline associated with an equal rise in the unemployment rate._x000D_ 1_x000D_ The principal difference between the linear and convex Phillips curves is that, under convexity, the short-run tradeoff facing policymakers is a function of the state of the economy: a one percentage point reduction in the unemployment rate leads to a smaller increase in inflation at high rates of unemployment than at low rates of unemployment. As a result, the nonaccelerating inflation rate of unemployment-the unemployment rate consistent with maintaining a stable average inflation rate over time-is not the same in a stochastic setting as it is in a deterministic setting. This reflects the fact that, in a stochastic economy with a convex Phillips curve, stable average inflation requires larger increases in unemployment when inflation is high than corresponding absolute declines in unemployment when inflation is low. Thus, the nonaccelerating inflation rate of unemployment in a stochastic setting is greater than its deterministic counterpart for any shock distribution. In contrast, under the linear model the nonaccelerating inflation rates of unemployment with and without shocks coincide. In order to emphasize this distinction we shall be referring to the nonaccelerating inflation rate in a stochastic setting as the NAIRU, while reserving the term deterministic NAIRU, or DNAIRU, for the nonaccelerating inflation rate of unemployment in the absence of shocks. Our NAIRU is thus consistent with the original Friedman (1968) definition of the natural rate of unemployment as the average unemployment rate in a stochastic setting.
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| Other form: | Print version: Tambakis, Demosthenes N. (Demosthenes Nicholas), 1968- Monetary policy with a convex Phillips curve and asymmetric loss. [Washington, D.C.] : International Monetary Fund, Research Dept., 1998
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| Standard no.: | 10.5089/9781451891713.001
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