I have said previously that I have lowered my estimate of NAIRU, for example, from 6% to 5 1/2%, in response to my reading of the evidence of the last several years. I have also raised my estimate of trend productivity -- from 1.1%, the average rate for the 20 years prior to the current expansion to 1.3% or 1.4%.
As you will recall, in 1947, two years after the war, Europe was still characterised by macroeconomic instability, inflation and an increasingly tight balance of payments constraint. The initial response by governments had been to counter inflation by retaining controls, thereby prompting the growth of black markets and discouraging transactions at official prices.