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This article seeks to estimate the non-accelerating inflation rate of unemployment (NAIRU) for the small open economy of Luxembourg. In its reduced form, the wage- and price-setting model developed by Layard et al. (1991) allows a definition of the concept of NAIRU (OECD, 2000). Kuttner’s model (1994)–initially defined to determine a measure of potential output– provides a sufficient empirical framework for estimating the indicator(EcfinDG,2002). The estimates obtained tend to show that labor-market tensions, defined as deviations of effective unemployment from NAIRU, help to explain a share of inflation in Luxembourg.