Time to Ditch the NAIRU
- 1 February 1997
- journal article
- Published by American Economic Association in Journal of Economic Perspectives
- Vol. 11 (1) , 93-108
- https://doi.org/10.1257/jep.11.1.93
Abstract
The concept of a natural rate of unemployment, or nonaccelerating inflation rate of unemployment (NAIRU), remains controversial after twenty-five years. This essay presents a brief for no-confidence, in four parts. First, the theoretical case for the natural rate is not compelling. Second, the evidence for a vertical Phillips curve and the associated accelerationist hypothesis that lowering unemployment past the NAIRU leads to unacceptable acceleration of inflation is weak. Third, economists have failed to reach professional consensus on estimating the NAIRU. Fourth, adherence to the concept as a guide to policy has major social costs but negligible benefits.Keywords
This publication has 2 references indexed in Scilit:
- The Macroeconomics of Low InflationBrookings Papers on Economic Activity, 1996
- A Systems Approach to Estimating the Natural Rate of Unemployment and Potential Output for the United StatesStaff Papers, 1990