Natural Rate

The paper argues that when some states are tight while others remain slack, a policy rule that also reacts to cross-state dispersion in unemployment gaps can deliver better inflation and slack outcomes than a rule based only on the national mean. The takeaway is a policy design point: heterogeneity is a potentially useful state variable for stabilization, not just a distributional detail.

This paper provide a nuanced understanding of the structural underpinnings of unemployment and offers policymakers a more accurate framework for analyzing unemployment dynamics.

Utilizing state-level data, this paper investigates the causal drivers of differences in the natural rate of unemployment across the US.