A Kalman filter approach to estimating the UK NAIRU

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A Kalman filter approach to estimating the UK NAIRU

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Jennifer V Greenslade
Richard G Pierse
Jumana Saleheen

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Abstract

In this paper, the Kalman filter method is applied to UK Phillips-curve models and estimates are derived for the NAIRU from 1973 to 2000. The resulting profiles suggest that the NAIRU peaked around the mid-1980s and fell back thereafter. Structural changes in the labour market have reduced inflationary pressure from that source, and we suggest that temporary effects from real import prices and real oil prices were an important additional downward influence on inflation in the latter half of the 1990s. Some of the uncertainties around our NAIRU estimates are shown. But, even though there may be uncertainty about exactly where the NAIRU is, a variety of models suggest that unemployment was below the NAIRU for much of the second half of the 1990s.

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Paper provided by Bank of England in its series Bank of England working papers with number 179.

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Handle: RePEc:boe:boeewp:179

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This paper has been announced in the following NEP Reports:

NEP-ALL-2003-04-21 (All new papers)
NEP-CMP-2003-04-21 (Computational Economics)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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Other versions:
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Other versions:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Nicoletta Batini & Jennifer Greenslade, 2003. "Measuring The UK Short-Run NAIRU," Discussion Papers 12, Monetary Policy Committee Unit, Bank of England. [Downloadable!]
Other versions:
- Nicoletta Batini & Jennifer V. Greenslade, 2006. "Measuring the UK short-run NAIRU," Oxford Economic Papers, Oxford University Press, vol. 58(1), pages 28-49, January. [Downloadable!] (restricted)
Franz, Wolfgang, 2003. "Will the (German) NAIRU Please Stand up?," ZEW Discussion Papers 03-35, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
Mark E Schweitzer, . "Wage flexibility in Britain: some micro and macro evidence," Bank of England working papers 331, Bank of England. [Downloadable!]
Alvaro Montenegro, 2005. "Introducción al filtro Kalman," DOCUMENTOS DE ECONOMÃA 002920, UNIVERSIDAD JAVERIANA - BOGOTÁ. [Downloadable!]
Charles St-Arnaud, 2004. "Une approche éclectique d'estimation du PIB potentiel pour le Royaume-Uni," Working Papers 04-46, Bank of Canada. [Downloadable!]
Colin Ellis, . "Elasticities, markups and technical progress: evidence from a state-space approach," Bank of England working papers 300, Bank of England. [Downloadable!]

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