Affiliation:
1. Professor at the Lyndon B. Johnson School of Public Affairs and in the Department of Government, University of Texas, Austin, Texas.
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.
Publisher
American Economic Association
Subject
Economics and Econometrics,Economics and Econometrics
Cited by
129 articles.
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