The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Natural Rate of Unemployment

  • Michael J. Pries
Reference work entry


Milton Friedman defined the natural rate of unemployment as the level of unemployment that resulted from real economic forces, the long-run level of which could not be altered by monetary policy. Macroeconomic policymakers continue to view the natural rate as a key benchmark due to the belief that monetary policy can counter short-run deviations of the unemployment rate from the natural rate. It is important, however, that policymakers focus as much attention on understanding the real determinants of the natural rate, and the policies that can affect it, as they do on trying to identify and counteract deviations from it.


American Economics Association Demography Friedman, M. Inflationary expectations Labour supply Natural rate of unemployment Phillips curve Rational expectations Real business cycles Search models of unemployment Taylor rule Unemployment insurance Unemployment–inflation tradeoff Wage rigidity 

JEL Classifications

D4 D10 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Michael J. Pries
    • 1
  1. 1.