The Natural Rate of Unemployment and the NAIRU: Theoretical Foundations, Empirical Evidence, and Policy Debates

Vîntu, Denis (2025): The Natural Rate of Unemployment and the NAIRU: Theoretical Foundations, Empirical Evidence, and Policy Debates.

Abstract

This paper explores the concepts of the natural rate of unemployment and the non-accelerating inflation rate of unemployment (NAIRU). It discusses their theoretical foundations, empirical estimation, and policy implications. While both concepts have been central to macroeconomic theory and policymaking, they remain controversial. The analysis draws on historical developments, empirical evidence, and contemporary debates to evaluate the relevance of these concepts in modern economies.

• Item Type: MPRA Paper
• Language: English
• Keywords: Simultaneous equations model; Labor market equilibrium; Unemployment rate determination; Wage-setting equation; Price-setting equation; Beveridge curve; Job matching function; Phillips curve; Structural unemployment; Natural rate of unemployment; Labor supply and demand; Endogenous unemployment; Disequilibrium model; Employment dynamics; Wage-unemployment relationship; Aggregate labor market model; Multivariate system estimation; Identification problem; Reduced form equations; Equilibrium unemployment rate
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C30 - General; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C31 - Cross-Sectional Models ; Spatial Models ; Treatment Effect Models ; Quantile Regressions ; Social Interaction Models; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C33 - Panel Data Models ; Spatio-temporal Models; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J64 - Unemployment: Models, Duration, Incidence, and Job Search; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J65 - Unemployment Insurance ; Severance Pay ; Plant Closings; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J68 - Public Policy

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