Nothing Natural About the Natural Rate of Unemployment
With unemployment reaching very low levels in major economies, despite low – and slowly rising – inflation, it's time for central banks to rethink their reliance on the so-called natural rate. No numerical target for this rate can serve as an anchor for monetary policy.
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NEW YORK – Why is unemployment so low in countries where inflation remains subdued? For economists, this is a fundamental question. And when economists confront a fundamental question, fundamental disagreement often follows.