Thursday, March 20, 2014

Measuring Slack in the Phillips Curve

According to a new paper coauthored by Alan Krueger, the short-term unemployment rate works better than the standard unemployment rate in explaining changes in inflation, and according to this measure, the economy was about at its NAIRU in 2013.  This finding is related to issues I discussed in a recent Times column.  Here is a relevant graph from the Krueger paper.