NAIRU

The non -accelerating inflation rate of unemployment ( NAIRU - Translation: unemployment at which inflation does not accelerate, German: inflation rate of unemployment ) is a product derived from the Phillips curve economic theoretical concept.

Behind the NAIRU is the idea that a certain unemployment rate signaled shortages in the labor market. If it falls below, this leads to higher wages and thus rising inflation. In countries with flexible labor markets, the NAIRU is generally low; The labor market is highly regulated, then it may come at the inflation at a high rate of unemployment.

Statistical surveys were able to prove the connection between changes in the inflation rate and the difference between the actual unemployment rate and the NAIRU in the U.S. and Europe during the past thirty years. Thus, can the correlation using the following formula, the so-called modified Phillips curve, describe:

Change in the inflation rate = - a * (actual rate of unemployment - NAIRU )

The change in the inflation rate here is simply the rate of inflation one year t minus the inflation rate for the year t -1.

A is a parameter ( = slope of the linear curve), which is between zero and one, and is intended to indicate that a one percent change in the inflation rate can not be transferred one- to-one, but that certain political structures (eg dismissal ) to mitigate the effects of fluctuations in inflation can, as above Europe and Japan in the case where the value of a is between 0.1 and 0.3. In the U.S., however, moves a empirical surveys show that around 0.4, reflecting the more flexible labor market.

Formal stuck behind two other critical formulas: On the one hand the Aggregate Demand - relation ( relation between inflation and growth rate) and on the other hand Okunsches law ( relationship between growth rate and changes in the unemployment rate ).