IS THE NAIRU THEORY A MONETARIST,NEW KEYNESIAN,POST KEYNESIAN OR A MARXIST THEORY?

The NAIRU (non‐accelerating inflation rate of unemployment) theory has become the mainstream theory in explaining unemployment in Europe and is often used to justify demands for a cutback of the welfare state, such as reducing unemployment benefits. Close inspection reveals that it, perhaps surprisingly, shares some arguments with Post Keynesian and even Marxist theory. The paper proposes an underdetermined, encompassing NAIRU model, which is consistent with several theoretical traditions. Depending on the closure with respect to demand formation and determination of the NAIRU itself, the model allows for New Keynesian, Post Keynesian and Marxist results.     

The NAIRU,Aggregate Demand and Investment

The nature of the non‐accelerating inflation rate of unemployment (NAIRU) is analysed. The focus of our analysis is the role of aggregate demand and capacity in the context of the NAIRU. Two aspects of the relationship between the level of aggregate demand and the NAIRU are of particular significance. First, it is argued that the real wage–employment relationship based on enterprise decisions cannot be fully articulated without reference to the level of aggregate demand. Second, a model which allows for variable returns to labour and the notion of full capacity is used to explore the effects of shifts in the capital stock on the real wage–employment relationship. The model is specifically used to explore whether a sufficiently expansionary environment can generate sufficient investment to shift that relationship until the NAIRU is compatible with full employment. A number of limitations on the conclusions reached are considered, and the policy implications are briefly considered.     

The Unemployment Effects of Proposed Changes in Social Security's “Normal Retirement Age”

This paper identifies and analyzes an inherent conflict between some proposed U. S. Social Security reform measures, which would encourage delayed retirement decisions, and the objective of minimizing the economy's unemployment rate. Using recent demographic trends in the age composition of the U.S. labor force, the study suggests that such proposed U.S. Social Security reform measures may actually increase the economy's unemployment rate. It concludes that measures to encourage older workers would relieve labor market pressures (while also helping the Social Security system) if and only if unemployment was persistently near the non-accelerating inflation rate of unemployment (NAIRU). However, in an economy with above NAIRU unemployment, which has been the case most often in recent years, the opposite Social Security policy logic would apply. JEL Classification H557     

MONETARY AND FISCAL INTERACTIONS: SHORT‐RUN AND LONG‐RUN IMPLICATIONS

We model policy interactions in a growing economy. Unemployment can persist and matters for the real wage; conflicting claims underpin inflation outcomes; and aggregate demand determines capacity utilization and unemployment. Monetary policy is characterized by a Taylor rule. Fiscal policy is characterized by a marginal tendency to run deficits or surpluses. We address three questions: can monetary policy ensure macroeconomic stability in the absence of coordinated fiscal policy, can fiscal policy ensure macroeconomic stability when the monetary authority pegs the interest rate, and can policy authorities trade‐off some sustained inflation for a long‐run improvement in unemployment rates?     

ARE LONG‐RUN PRICE STABILITY AND SHORT‐RUN OUTPUT STABILIZATION ALL THAT MONETARY POLICY CAN AIM FOR?

A central tenet of the so‐called new consensus view in macroeconomics is that there is no long‐run trade‐off between inflation and unemployment. The main policy implication of this principle is that all monetary policy can aim for is (modest) short‐run output stabilization and long‐run price stability, i.e. monetary policy is neutral with respect to output and employment in the long run. However, research on the different sources of path dependency in the economy suggests that persistent but nevertheless transitory changes in aggregate demand may have a permanent effect on output and employment. If this is the case, then, the way monetary policy is run does have long‐run effects on real variables. This paper provides an overview of this research and explores conceptually how monetary policy should be implemented once these long‐run effects are acknowledged.     

What moves option‐implied bond market expectations?

This article examines the impact of macroeconomic news announcements on bond market expectations, as measured by option‐implied probability distributions of future bond returns. The results indicate that expected bond market volatilities increase in response to higher‐than‐expected inflation and unemployment announcements. Furthermore, the asymmetries in bond market expectations are found to be affected mostly by surprises in inflation and economic production figures. In particular, it is found that higher‐than‐expected inflation announcements cause optionimplied bond return distributions to become more negatively skewed or less positively skewed, implying a shift in market participants' perceptions toward future increases in interest rates. Finally, the results indicate that market expectations of future extreme movements in bond prices are virtually unaffected by macroeconomic news releases. Some evidence is found, however, that suggests that after extreme surprises in inflation announcements market participants attach higher probabilities for extreme movements in bond prices. © 2005 Wiley Periodicals, Inc. Jrl Fut Mark 25:817–843, 2005     

菲利普斯曲线在我国不适用的成因分析

菲利普斯曲线是建立在西方发达的市场经济的基础之上的,由于国情和经济体制的不同,菲利普斯曲线在我国并不适用。现阶段通货膨胀与失业率不符合菲利普斯曲线所规定的负相关关系,也是菲利普斯曲线在我国不适用的另一个原因。要解决失业问题,简单地通过提高通货膨胀率来解决失业问题时就会失效。我国可以通过投资来刺激经济增长,实现降低失业率的目标。在实现这一目标的过程中,尤其要注意我国经济的结构问题,应加快第三产业的发展速度,有侧重的对第三产业给予支持,这将是我国解决就业问题的一个新出路。     

UNIONS,MONOPOLISTIC COMPETITION AND THE OPTIMAL MONETARY REGIME

This paper considers the optimal monetary regime in a monopolistically competitive economy where wages are set by non‐atomistic (i.e. large) unions. In such a context, the conduct of monetary policy is known to influence not only the equilibrium inflation rate, but also equilibrium employment. Previous contributions which have examined this scenario have commonly concluded that a low degree of accommodation of wages and prices is optimal. This study shows, however, that the framework's principal features imply a highly accommodating policy stance can potentially achieve a superior outcome and, indeed, despite its character, is able to both eliminate unemployment and deliver zero inflation.     

Is the unemployment–inflation trade-off still alive in the Euro Area and its member countries? It seems so

The unemployment–inflation trade-off can be interpreted as a proposition concerning the response of these two variables to aggregate demand shocks. In this paper, we study the possible presence of the trade-off in the Euro Area and in a wide group of Euro-area countries in the last 20 years, that is, since the start of EMU. We use the structural VAR methodology that allows the separation between supply and demand shocks. Our main finding is that the existence of a trade-off is largely confirmed both at the Euro Area and at the national level. Nevertheless, the size of the trade-off, measured at different horizons, shows some heterogeneity among countries. No less important, when we augment the VAR model by introducing monetary policy in the context of an open economy, we find that monetary policy shocks push inflation and unemployment in opposite directions in the currency area. Another interesting result concerns the evidence of a relatively flat relation between unemployment and inflation, conditionally to monetary policy shocks. The bulk of these conclusions seem to be confirmed by a number of robustness checks.     

Monetary Dynamics of Inflation in China

This paper investigates both the short‐run and the long‐run relationships between monetary growth and inflation in China between 1980 and 2010. We construct multivariate dynamic models based on Friedman’s quantity theory of money (but permitting money to be endogenous) and Meltzer’s monetarist model. The empirical results provide robust evidence that there is a bilateral causal relationship between monetary growth and inflation as well as between monetary growth and output growth. An indirect and implicit causal relationship between monetary growth and inflation is found through the asset inflation channel. There are also long‐run equilibrium relationships between money stock, price index and other relevant variables. The present paper further provides a historical exploration of the mechanism of the monetary dynamics of inflation in China over the underlying period. We conclude that the monetary growth rule is likely to be the most promising policy orientation for China to manage its inflation.     

A note on the demand for labor by firms and the Phillips curve phenomenon

This paper derives microeconomic implications of an increase in inflation uncertainty for a firm's demand for capital and labor resources. The concern for this topic is motivated by an interest in the effect of inflation uncertainty on the demand for labor and especially the Phillips curve. The basic idea is that an increase in the actual inflation rate increases inflation uncertainty with respect to the rental price of capital relative to that of labor, which in turn increases the demand for labor, both absolutely and relative to the capital stock. The result is a decline in unemployment.     

Is the Fed Funds Rate Still Effective?

Both the depth and length of the Great Recession create the impression that the economy proved impervious to monetary policy. Policy rates, such as the federal funds rate (fed funds rate), were set at record lows, but the recovery in housing, employment, and GDP were subpar at best. Now with a self-sustaining expansion, the FOMC began rolling back its asset purchases program and, at some point in the future, it will start increasing its target for the fed funds rate. This raises the questions of whether the fed funds rate remains an effective tool and what effect an altered Federal Reserve balance sheet will have on inflation and the unemployment rate in the post-Great Recession world. Our econometric analysis suggests that since the 1990s, the traditional tools of monetary policy (such as the fed funds rate) may have influenced the unemployment rate but that it did not influence inflation. Thus, the effect a change in the fed funds rate may not be as straightforward as suggested by the conventional economic theory and the traditional link between interest rates and inflation and unemployment may have broken down.     

A SCHUMPETERIAN GROWTH MODEL WITH EQUILIBRIUM UNEMPLOYMENT

We introduce efficiency‐wage unemployment in a model of growth with endogenous technical change. Our research aim is twofold. First, we try to provide an analytically tractable model of growth with efficiency‐wage unemployment that can be viewed as alternative to the standard models of growth and search unemployment. Second, we try to analyze the steady‐state effects of some labor market policies on unemployment and growth. We find that a positive relationship between growth and unemployment exists and that the effectiveness of any labor market policy aimed at improving the performance of the labor market crucially depends on how individuals discount future income.     

The responses of U.S. multinational corporations to increased competition for international markets

Abstract

Extending the original Taylor rule and applying the VAR model, the author finds that the federal funds rate (FFR) responds positively to a shock to the output gap, the inflation gap, the long-term interest rate, or the lagged FFR, and it reacts negatively to a shock to the unemployment rate gap or the exchange rate. The response of FFR to stock prices is insignificant at the 5% level. The long-term rate can explain up to 41.3% or 46.1% of the variation in FFR, depending on the model considered. The exchange rate can explain up to 8.5% or 12.3% of the variance, depending on the model considered. The output gap can explain up to 26.6% of FFR variance. The unemployment rate gap can explain up to 26.8% of the variation in FFR. Because FFR responds to a shock to the output gap and the unemployment rate gap in a similar manner, both may be considered in conducting monetary policy. The more explanatory power of the long-term interest rate than the inflation gap may suggest that both need to be taken into consideration in the Taylor rule.     

The Trouble with Offshoring: Static and Dynamic Losses in the Presence of Unemployment

This study provides theoretical support for the popular objection to offshoring, whereby firms at home employ services of labour located abroad. In the presence of unemployment, our analysis highlights welfare losses from offshoring – not only for the static case of a fixed stock of capital, but also for the dynamic one of optimal saving and investment. We compare these static and dynamic losses to the gains that would instead arise under full‐employment conditions, assumed by most of the theoretical literature on offshoring. Our results suggest that public concerns over offshoring are justified when unemployment is taken explicitly into account.     

TRANSITIONS OUT OF UNEMPLOYMENT: THE ROLE OF SOCIAL NETWORKS' TOPOLOGY AND FIRMS' RECRUITMENT STRATEGIES

In this paper we study the effects of job contact networks on out‐of‐unemployment transitions. We find that social connections produce sizable increases in upward mobility from unemployment and, caeteris paribus, symmetric network topologies perform better than asymmetric ones. Furthermore, in scale‐free networks the probability of transitions out of unemployment increases in the exponent of the power‐law degree distribution, but its value is much lower than the one attainable in Poisson random networks. In addition, and most interestingly, these results strongly depends on the different hypotheses on the firms' recruitment strategy.     

GROWTH,UNEMPLOYMENT AND ENDOGENOUS TECHNICAL PROGRESS: A HICKSIAN RESOLUTION OF HARROD'S KNIFE‐EDGE

This paper presents a neo‐Kaleckian growth model with unemployment, endogenous technical progress, and a steady‐state requirement of balanced labor demand and supply growth. There are two key innovations: first, a Marx–Hicks unemployment rate–profit rate channel affecting labor‐saving technical progress; second, a Keynesian unemployment rate channel affecting saving and investment. Changes in the unemployment rate change the profit rate, rebalancing effective labor supply and employment growth. This provides a Hicksian resolution of Harrod's knife‐edge. The Keynesian unemployment rate channel strengthens the growth benefits of a lower unemployment rate, potentially obviating any growth–unemployment trade‐off.     

THE LABOUR MARKET AND TECHNICAL CHANGE IN ENDOGENOUS CYCLES

The paper examines how a macro model, where there is an endogenous technical progress and strong interdependence between real and monetary aspects in both the labour and capital markets, can generate endogenous business cycles. This approach helps to understand the ambiguity of the NAIRU, the nature of the Phillips curve and the impact of labour productivity changes on the curve itself. Finally, the presence of expectation functions based upon a Markov‐switching time series process fosters endogenous dynamics and contributes to make asymmetries an important feature of the cycles.     

Is the US Dollar a Suitable Anchor for the Newly Proposed GCC Currency?

Responses of inflation and non‐oil output growth from the Gulf Cooperation Council (GCC) countries to monetary policy shocks from the United States (US) were estimated to determine whether there is evidence to support the US dollar as the anchor for the proposed unified currency. A structural vector autoregression identified with short‐run restrictions was employed for each country with Fed funds rate as the US monetary policy instrument, non‐oil output growth and inflation. The main results suggest that for inflation, the GCC countries show synchronised responses to monetary policy shocks from the US which are similar to inflation in the US, and for non‐oil output growth, there is no clear indication that US monetary policy can be as effective for the GCC countries as it is domestically. Consequently, importing US monetary policy via a dollar peg may guarantee only stable inflation for the GCC countries – not necessarily stable non‐oil output growth. If the non‐oil output response is made conscientiously – and there are concerns over the dollar’s ability to perform its role as a store of value – a basket peg with both the US dollar and the euro may be a sound alternative as confirmed by the variance decomposition analysis of our augmented SVAR with a proxy for the European short‐term interest rate.     

MARKETS FOR INFLATION‐INDEXED BONDS AS MECHANISMS FOR EFFICIENT MONETARY POLICY

We consider a continuous‐time framework featuring a central bank, private agents, and a financial market. The central bank's objective is to maximize a functional, which measures the classical trade‐off between output and inflation over time plus income from the sales of inflation‐indexed bonds minus payments for the liabilities that the inflation‐indexed bonds produce at maturity. Private agents are assumed to have adaptive expectations. The financial market is modeled in continuous‐time Black–Scholes–Merton style and financial agents are averse against inflation risk, attaching an inflation risk premium to nominal bonds. Following this route, we explain demand for inflation‐indexed securities on the financial market from a no‐arbitrage assumption and derive pricing formulas for inflation‐linked bonds and calls, which lead to a supply‐demand equilibrium. Furthermore, we study the consequences that the sales of inflation‐indexed securities have on the observed inflation rate and price level. Similar to the study of Walsh, we find that the inflationary bias is significantly reduced, and hence that markets for inflation‐indexed bonds provide a mechanism to reduce inflationary bias and increase central bank's credibility.