The Structuralist Perspective on Real Exchange Rate, Share Price Level and Employment Path: What Room Is Left for Money?

• Main Authors: Phelps, Edmund S., HOON, Hian Teck, ZOEGA, Gylfi
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2004
• Subjects: Finance; Macroeconomics; Public Economics
• Online Access: https://ink.library.smu.edu.sg/soe_research/781; https://ink.library.smu.edu.sg/context/soe_research/article/1780/viewcontent/newschool.pdf
• Institution: Singapore Management University

The current sluggish performance of the US economy follows one of the more remarkable booms in modern history. The late 1990s was a period of simultaneous output and productivity growth,1 low unemployment and stable inflation, culminating in an unemployment rate of only 3.9% in the fourth quarter of the year 2000. The absence of rising inflation during this period came as a surprise to many since the level of the natural rate of unemployment was commonly estimated to be in the range of 5-6% by the mid 1990s. The non-inflationary boom, however, reminds one of another episode where non-monetary forces were strongly at work, namely, the non-deflationary slump in Europe and elsewhere in the 1980s and 90s, which appeared to signal a move to a higher natural rate of unemployment. The modeling of such structural slumps and booms is the task that we have tackled in a number of papers in recent years, the book Structural Slumps being a major milestone.