Nairu And Economic Policy Making in Economy Iran



In this research, the attempt was made to test the existence of the natural rate hypothesis in Iran, by using a Johansson cointegration test. The results do not reveal any long run relationship between inflation and unemployment in Iran for 1340-1386 periods.
Because of the time varying nature of NAIRU, the HP filter was applied to estimate the time series of NAIRU. Comparing the NAIRU time series and the actual unemployment rates reveal that, in the period under consideration (except for 1386), the actual unemployment rate was bove NAIRU . The results indicate that, in the long run, the compensatory monetary policy only lead to high inflation rates.Therefore, for catching up to Nairue position. sticking to a monetary rule is required.
JEL classification: E24, E31, J60, JELNO