Strong employment, low inflation: How has the US economy done so well?

This paper reviews the strong economic news from the United States over the 1990s, with continuing economic growth in the presence of low unemployment and low inflation. This favourable unemployment-inflation trade-off has be en possible in part because of a series of factors that kept price inflatio n low. In addition, a number of labour market changes have also allowed out put (and employment) to grow without wage inflation. The paper explores a v ariety of theories about the long run-prospects for these trends to continu e. The final section discusses some policy issues raised by this ongoing ex pansion.