Natural Rate of Unemployment and NAIRU (1 Viewer)

[[4m th4 8ur82]]

so where does the cutting wages thing come in again??

sorry, im slow...

 

[ay_caramba]

*long and meaningless ramble was here before*
thanx

 

[kochou]

right right

 

[ay_caramba]

ahahaaha
ok i shut up

 

[CaR]

lol...no..keep on rambling...

does anyone know the current natural rate of unemployment in australia is?

 

[ay_caramba]

its estimated to be around 6%
*closes mouth*

 

[kochou]

so its higher than the normal unemployment figure?

 

[nova]

Originally posted by mushroom_head
so what has the natural rate of unemployment got to do with inflation?? hehe..i still don't get it!

The natural rate of unemployment, also known as the non-accelerating-inflation rate of unemplyotment is the lowest rate to which unemployment can fall before shortages of labour lead to excessive pay raises and, hence, worsening inflation. (higher wages -> more money to spend -> higher agg demand -> higher prices = inflation)

Read the article "Unemployment limbo: how low should we go?" written by Ross Gittins in the SMH weekend ed, 29-30 may 2004.

 

[kochou]

herres that gittens article by the way:
http://smh.com.au/articles/2004/05/28/1085641712893.html

so taht would mean NAIRU/natural rate of unemployments CANT be lower than normal unemployment rate which is under 6% ..?

 

[mushroom_head]

hey! i get it now! thanQ

Originally posted by kochou
[B
so taht would mean NAIRU/natural rate of unemployments CANT be lower than normal unemployment rate which is under 6% ..? [/B]

that's what i wanna know too. but in the article, Gittens said that they are unsure whether the normal unempl. rate is under the NAIRU so i think it's possible. i "think"!

 

[kochou]

heeh i just read the gittens article and its so good and intersting!

still its like they try so hard to confuse us, all these names for the same thing grrrr

 

[mushroom_head]

Originally posted by kochou
they try so hard to confuse us, all these names for the same thing grrrr

lol i reckon eh! can't they just stick with the same name to make life easier for people like me?!

 

[CaR]

maybe they should one day publish an economics thesaurus...that ought to do it =D

 

[iwantnotes&stuf]

yeah thats a good article
there are a few good explanations already, but;
nairu is the same as the 'natural rate'. it is argued that 0% of unemployment is impossible,[ and it is in all of todays economies for a huge number of reasons]. the natural rate is a medium term concept- which can't be accurately measured, but is somewhere between 5-6% at the moment. [ last year it was probably 6-7%..?]

Even if we get unemployment down to 3% - at the cost of say 10% inflation, in a matter of months/weeks- the unemployment rate will rise back up to 5-6% .

hope that helps anyone

 

[nova]

yeah thats a good article
there are a few good explanations already, but;
nairu is the same as the 'natural rate'. it is argued that 0% of unemployment is impossible,[ and it is in all of todays economies for a huge number of reasons]. the natural rate is a medium term concept- which can't be accurately measured, but is somewhere between 5-6% at the moment. [ last year it was probably 6-7%..?]

Even if we get unemployment down to 3% - at the cost of say 10% inflation, in a matter of months/weeks- the unemployment rate will rise back up to 5-6% .

hope that helps anyone

Was just about to explain exactly the same thing. Nicely done

 

[Wild Dan Hibiki]

ok so the natural rate of unemployment occurs when all economic resources are employed?

 

[ar5ena1]

No, thats not correct.

 

[Wild Dan Hibiki]

awww crap
lol oh wells

 

[nova]

ok so the natural rate of unemployment occurs when all economic resources are employed?

The name NAIRU will help you remember what the natural rate of inflation means.

non-ACCELERATING INFLATION , rate of unemployment

It's the level that unemployment can drop down to, before demand for labour puts up wage rates, which increases agg demand (more money -> want to spend more) which will put up inflation. Hence, the name!

Hope this helps you

 

[Wild Dan Hibiki]

oh so lowest level of unemployment before inflation kicks in
thanks