The difference between actual unemployment and this long-term unemployment rate became the variable used as proxy for demand pressure in the market of goods and services, seen as the main theoretical cause of inflation. Inflation was an excess demand phenomenon and demand could be controlled by monetary policy — via monetary aggregates for Friedman or with interest rates, as believed today.
In practice, estimates of a Non-Accelerating Inflation Rate (NAIRU) are what is obtained instead of the unobservable long-term NARU, which are doubtfully deemed to be the same. In the late 1970s, two different research approaches emerged, thus characterised by Robert Gordon[29] : “The left fork in the road,… is the resurrection of Keynesian economics in the form of a ….