ABSTRACT
The current sluggish performance of the US economy follows one of the most remarkable booms in recorded history. The late 1990s was a period of striking expansion of both output and employment, with the unemployment rate hitting 3.9 percent in 2000; productivity growth was much improved, in part because of higher utilization, though not exceptional. 1 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 percent by the mid-1990s. The noninflationary boom, however, reminds one of another episode where nonmonetary forces were strongly at work, namely the nondeflationary slump in Europe and elsewhere in the 1980s and 1990s, 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 series of works in recent years, the book Structural Slumps being a milestone. 2
