In "
Why we have to learn about NAIRU (and reject it)", Bill Mitchell discusses the theoretical problems with NAIRU. NAIRU is the
Non-Accelerating Inflation Rate of Unemployment, which replaced the "natural rate of unemployment", which was empirically rejected. Professor Mitchell actually posts a video that demonstrates how the estimated NAIRU is just a smoothed version of unemployment. In other words, it is almost the same thing as taking an exponential moving average of the unemployment rate (as known as "
adaptive expectations"). (Bodies that calculate the NAIRU, like the OECD, probably use a more complicated filter, but the result ends up being roughly the same.)
As my chart above shows, there does not appear to be a level for the unemployment rate for which:
- if the unemployment rate is above that level, inflation falls; and
- if the unemployment rate is below that level, inflation rises.
Also, in "
On the (ir)relevance of the money multiplier model: The Fed view", "circuit" of the
Fictional Reserve Barking blog gives a good literature survey of the money multiplier. In summary: the Fed has not believed in the money multiplier for a long time, and it is a mystery why textbooks still refer to it.
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