In Search of the NAIRU
Few ideas arise more frequently in monetary policy discussions than the NAIRU, an acronym for the awkward phrase “nonaccelerating inflation rate of unemployment.” The NAIRU—or more precisely, its relationship to the unemployment rate—is presumed to be an inflationary bellwether. When the actual unemployment rate exceeds the NAIRU, the inflation rate falls; when the actual rate is below the NAIRU, inflation rises.
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