Citation:

Mehdi Mohebi. "Futuristic Projection of Time-Varying NAIRU for Canadian Economy and Its Implication for Changes in Economic Growth" International Research Journal of Economics and Management Studies, Vol. 3, No. 5, pp. 300-306, 2024.

Abstract:

The Non-Accelerating Inflation Rate of Unemployment stands for a rate of unemployment that will not put pressure on the economy and facilitates economic growth without any inflationary pressures. This concept originated from the Philips curve, in which if economic agents are employed at full capacity, the economy produces in the long run. If we remove the inflationary pressure, we can estimate the NAIRU, which is a better policy tool. This paper seeks to estimate the time series of NAIRU in the Canadian economy for the years between 2005 to 2022. The persistency of unemployment in the Canadian economy is analyzed via NAIRU and its fluctuations. Their contribution to economic growth is considered by breaking total unemployment to NAIRU and the Unemployment Gap, which is derived from the Philips curve. The results reflect that the equilibrium unemployment rate for the Canadian economy is around 2 percent, and according to the projection of future trends, the government and, specifically Central Bank should target this rate in order to prevent fluctuations and keep the economy in its steady state in the long run. Moreover, through the Granger causality test, it is approved that NAIRU is a granger cause of economic growth.

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Keywords:

NAIRU, Economic Growth, Granger Causality, persistency.