This paper assesses the Layard et al. (1991) NAIRU framework for explaining unemployment. Their approach is distinct from the natural rate of unemployment framework in that it postulates a short-run NAIRU influenced by 'hysteresis'. It is pointed out that this is not hysteresis in the meaning...

This paper argues that the natural rate of unemployment hypothesis, in which equilibrium unemployment is determined by ‘structural’ variables alone, is wrong: it is both implausible and inconsistent with the evidence. Instead, equilibrium unemployment is haunted by hysteresis. The...