Karanassou, Marika; Sala, Hector; Salvador, Pablo F. - Institute for the Study of Labor (IZA) - 2006
We reconsider the central role of the natural rate of unemployment (NRU) in forming policy decisions. We show that the … unemployment rate does not gravitate towards the NRU due to frictional growth, a phenomenon that encapsulates the interplay between … empirical analysis and find that the NRU explains only 33% of the unemployment variation, while frictional growth accounts for …