Publication Year

1998

Keywords

Economics, unemployment, natural rate, inflation rate

Disciplines

Economics | Growth and Development | Labor Economics

Abstract

In our economy, two related concepts--the natural rate of unemployment (NRU) and the Non-Accelerating Inflation Rate of Unemployment (NAIRU)--have been a source of debate and controversy among economists for many decades. It appears that the NRU and NAIRU are useful as theoretical concepts, while the NAIRU has limited practical uses for monetary policy. One should be careful about the use of the NAIRU as a policy guide for three main reasons. First, the empirical research gives a fairly wide range of estimates for the NAIRU. Second, this range is so wide that the policy maker cannot be sure what the precise NAIRU is. Finally, the NAIRU varies over time, and a number of the factors which affect the NAIRU are difficult to predict.

Department 1 Awarding Honors Status

Economics

Share

 
COinS