The consensus in the profession is that NAIRU may have declined from around 6 percent in the decade ending in the early 1990s to perhaps 5½ percent today, though some believe that the decline is even larger, while others believe that any appearance of decline is due to temporary factors so that NAIRU will ultimately settle back to close to the earlier estimate.
Clearly, one of the challenges of monetary policy is to set policy in the context of uncertainty about the precise value of NAIRU. The second element in the analytical framework is the link from output growth to the level of excess demand.