I have been looking for information on when the NAIRU was used as a benchmark for monetary policy in the United States.
The Non-Accelerating Inflation Rate of Unemployment (NAIRU) was implicitly targeted by the Federal Reserve rather than explicitly targeted. The concept of NAIRU, which represents the level of unemployment below which inflation tends to rise, has influenced the Fed's monetary policy decisions since the 1970s. However, the Fed does not explicitly set policy based solely on NAIRU but considers a range of economic indicators, including inflation, employment, and growth, in its decision-making process.
Hi Chuck,
I covered the Fed for S&P during the Greenspan era. We certainly were talking about NAIRU back in the late 90s, but we were perplexed by the low inflation and high employment.
I don't research this topic directly, but I would assume there are structural breaks associated with technological improvements during that era. I'm hoping we can repeat the economy of that relatively peaceful time, at least for the US.
I look forward to what others have to say on the topic.
Jim
Chuck A Arize Thanks for the feedback! The NAIRU is embedded in the Taylor Rule as well as virtually all of the incarnations of the Phillips Curve. It is hard to imagine that it has been implicit. I am just trying to find information related to when policymakers started thinking about it when they made forecasts for the path of interest rates.
I agree with Chuck, it was never actually explicit. If you look back at the history of monetary policy in the US, I believe there are only two periods with an explicit target rule. The first is 79-82, based on M1 growth, and the other is a 2 percent inflation target in modern times.
For NAIRU to be an explicit target, there would have to be an announcement of such, like Volcker's October 79. Even our two percent inflation target is a loose target.
One could text search the old Fed transcripts with Python to find early discussions of the Phillips Curve and NAIRU.
James Forest Yes, I have been looking through the FOMC transcripts, but I have not narrowed in on a precise date.
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