Non-Accelerating Inflation Rate of Unemployment

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Non-Accelerating Inflation Rate of Unemployment

Also called NAIRU. The unemployment rate in an economy below which inflation will begin to rise. The idea behind NAIRU states that a certain unemployment rate is built in to an economy. If unemployment falls too far, the economy will begin to overheat and inflation will rise. This analysis is highly controversial; some economists hold full employment is possible without these negative side effects. Milton Friedman was a major proponent of the NAIRU idea. See also: Phillips curve.
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References in periodicals archive ?
As with the natural unemployment rate, the equilibrium interest rate is a concept that cannot be directly observed, but must be estimated.
All this does not mean there is no natural unemployment rate, only that there is nothing natural about it.
This is below the Fed's hypothesized 4.6% natural unemployment rate. But inflation rate is not rising.
According to Bernanke, the two changes in participants' views that have been "most important in pushing the FOMC in a dovish direction" are the downward revisions in the estimates of the terminal funds rate and the natural unemployment rate.
Specifically, [[bar.U] [R.sub.t]] is the natural unemployment rate (i.e., NAIRU), corresponding to the natural rate of output [[bar.y].sub.t], permitting us to refer to (U [R.sub.t ] - [[bar.U] [R.sub.t]]) as the unemployment rate gap.
(2.) The Congressional Budget Office provides an estimate of the natural unemployment rate that is currently at 5.5 percent.
As more people cannot or choose not to work full-time, the United States now has a smaller potential labor force, which, paired with the CBO's new, increased figure for "natural unemployment rate," correlates with smaller possible output.
The results prove our hypothesis the Phillips curve is not vertical in the long run but oscillating (on small scale) about the natural unemployment rate (or in the golden triangle terminology about the golden unemployment node).
"A threshold of 5.5 percent would put the point of the funds rate lift-off well below where six persons on the committee see the natural unemployment rate," JPMorgan economist Michael Feroli wrote in a note to clients, referring to the level of unemployment officials think can be achieved without touching off inflation.
However, they have no response for now to the dilemma of how high the so-called natural unemployment rate in Macedonia is.
The Congressional Budget Office's latest estimate suggests that the natural unemployment rate is between 5.5 percent and 6.0 percent.
Unfortunately, potential GDP and the natural unemployment rate are unobservable.