And during the transition to this new equilibrium, nominal wage growth will fall short of its normal relationship to prices and the unemployment rate, appearing as transitory decline in NAIRU. Whether the decline in job security also leads to a permanent decline in NAIRU is a more difficult issue to assess.
BIS Review 4/1997  -6-  An alternative or complementary explanation for the surprising inflation performance is the perception of an absence of pricing leverage on the part of firms. In this story, the dynamics of the inflation process seem almost reversed from the way I have traditionally modeled them. The traditional econometric model specifies prices as set in relation to costs.