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The Natural Rate of Unemployment and its Implications for Economic Policy

Author

Listed:
  • Monica DOBRESCU

    (Bucharest Academy of Economic Studies)

  • Claudia PAICU

    (Bucharest Academy of Economic Studies)

  • Silvia IACOB

    (Bucharest Academy of Economic Studies)

Abstract

The analysis of the inflation-unemployment tradeoff has undergone several stages during the post-war era. The first was marked by the acceptance of A.W. Phillips’ 1957 hypothesis and the subsequent Phillips curve. The next stage – marked by Friedman’s contributions – revealed a vertical long-run Phillips curve and introduced the natural rate of unemployment, designating that level of unemployment consistent with stable inflation. This paper explores the theoretical and empirical implications that have emerged since the introduction of the natural rate concept. At the theoretical level, we find that, far from questioning its existence, the theoretical debates revolve around two main questions: Can we actually determine the precise level of the natural rate and what are the appropriate techniques? and How does the natural rate change over time and what are the factors that influence it? Empirical knowledge, on the other hand, lags behind. Despite numerous empirical studies, economists are a long way from an appropriate quantitative understanding of the determinants and variability of the natural rate, either across time or across countries.

Suggested Citation

  • Monica DOBRESCU & Claudia PAICU & Silvia IACOB, 2011. "The Natural Rate of Unemployment and its Implications for Economic Policy," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(2(555)), pages 181-194, February.
    • Handle: RePEc:agr:journl:v:2(555):y:2011:i:2(555):p:181-194
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    Citations

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    Cited by:

    1. Pasca Cornelia Serena, 2016. "Labour Market - Concepts, Functions, Features, Patterns," Management Strategies Journal, Constantin Brancoveanu University, vol. 34(4), pages 201-209.
    2. Pervin, Shahida, 2018. "Dynamics and Interactions of Monetary Policy and Macroeconomic Variables: Empirical Investigation in the UK Economy with Bayesian VAR," MPRA Paper 91816, University Library of Munich, Germany.
    3. Constantin DUGULEANĂ, 2014. "Permanent Unemployment, A Reflection Of Changing The Basic Structure Of Economic Activities," CrossCultural Management Journal, Fundația Română pentru Inteligența Afacerii, Editorial Department, issue 2, pages 297-304, November.

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