NAIRU

In monetarist economics, particularly the work of Milton Friedman,^[1] NAIRU is an acronym for non-accelerating inflation rate of unemployment,^[2] and refers to a level of unemployment below which inflation rises.

If is the NAIRU and is the actual unemployment rate, the theory says that:

if for a few years, inflationary expectations rise, so that the inflation rate tends to accelerate;

if for a few years, inflationary expectations fall, so that the inflation rate tends to slow (there is disinflation); and

if , the inflation rate tends to stay the same, unless there is an exogenous shock.