NAIRU

Non-accelerating inflation rate of unemployment (NAIRU)^[1] is a theoretical level of unemployment below which inflation would be expected to rise.^[2] It was first introduced as NIRU (non-inflationary rate of unemployment) by Franco Modigliani and Lucas Papademos in 1975, as an improvement over the "natural rate of unemployment" concept,^[3]^[4]^[5] which was proposed earlier by Milton Friedman.^[6]

In the United States, estimates of NAIRU typically range between 5 and 6%.^[2] Monetary policy conducted under the assumption of a NAIRU, typically involves allowing just enough unemployment in the economy to prevent inflation rising above a given target figure. Prices are allowed to increase gradually and some unemployment is tolerated.

^ Coe, David T, Nominal Wages. The NAIRU and Wage Flexibility. (PDF), Organisation for Economic Co-operation and Development
^ ^a ^b The NAIRU, explained: why economists don't want unemployment to drop too low, Vox, Matthew Yglesias, Nov 14, 2014. " . . it's broadly agreed that the NAIRU can change over time. . "
^ Modigliani, Franco; Papademos, Lucas (1975). "Targets for Monetary Policy in the Coming Year" (PDF). Brookings Papers on Economic Activity. 1975 (1). The Brookings Institution: 141–165. doi:10.2307/2534063. JSTOR 2534063.
^ Robert M. Solow, Modigliani and Monetarism Archived 2014-12-28 at the Wayback Machine, p. 6.
^ Snowdon, Brian; Vane, Howard R. (2005). Modern Macroeconomics: Its Origins, Development and Current State. Cheltenham: E. Elgar. p. 187. ISBN 1-84376-394-X.
^ Friedman, Milton (1968). "The Role of Monetary Policy". American Economic Review. 58 (1): 1–17. JSTOR 1831652.

[1] Coe, David T, Nominal Wages. The NAIRU and Wage Flexibility. (PDF), Organisation for Economic Co-operation and Development

[Vox,_Matthew_Yglesias,_Nov._2014-2] The NAIRU, explained: why economists don't want unemployment to drop too low, Vox, Matthew Yglesias, Nov 14, 2014. " . . it's broadly agreed that the NAIRU can change over time. . "

[3] Modigliani, Franco; Papademos, Lucas (1975). "Targets for Monetary Policy in the Coming Year" (PDF). Brookings Papers on Economic Activity. 1975 (1). The Brookings Institution: 141–165. doi:10.2307/2534063. JSTOR 2534063.

[4] Robert M. Solow, Modigliani and Monetarism Archived 2014-12-28 at the Wayback Machine, p. 6.

[5] Snowdon, Brian; Vane, Howard R. (2005). Modern Macroeconomics: Its Origins, Development and Current State. Cheltenham: E. Elgar. p. 187. ISBN 1-84376-394-X.

[6] Friedman, Milton (1968). "The Role of Monetary Policy". American Economic Review. 58 (1): 1–17. JSTOR 1831652.

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