It is also useful to derive a short-run or effective NAIRU, allowing for the effect of an acceleration of productivity on the level of the unemployment rate consistent with steady inflation. The expression for the short-run NAIRU (U**) is derived in equation 4’.
The same is true of the sharp correction that followed in late-2008, as well as the recent rebound. 5 These three episodes mirrored the phenomenal rise, sudden collapse, and equally sharp recovery in global growth over the period.