Estimating Non Acceleration Inflation Rate of Unemployment (NAIRU): Using Different Filters in Iran

NAIRU plays an important role in guiding monetary policy to control inflation and unemployment. The purpose of this paper is to estimate the so-called “Non- Accelerating Inflation Rate of Unemployment” (NAIRU) in Iran. In this paper, different filters such as Kalman, Hodrick-Perescott and Band-Pass have been used during 1348-1388 (1969-2009). Also, The NAIRU estimations under the above different filters were compared to the actual rate of unemployment. Our findings indicate that the Kalman filter is more consistent with the performance of the Iranian economy. The average NAIRU estimated under Kalman filter was about %10.8 during the period. Using suitable monetary policy can reduce the so-called unemployment gap measuring the deviation between NAIRU and the actual unemployment rate.