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Testing Steady-State Implications for the NAIRU

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  • Gunnar Bårdsen

    ()
    (Department of Economics, Norwegian University of Science and Technology)

  • Ragnar Nymoen

    ()
    (Department of Economics, University of Oslo)

Abstract

Estimates of the NAIRU are usually derived either from a Phillips curve or from a wage curve. This paper investigates the correspondence between the operational NAIRU-concepts and the steady state of a dynamic wage-price model. We derive the parameter restrictions that secure that correspondence. The full set of restrictions can be tested by econometric analysis of the wageprice system, and this method is demonstrated for Norwegian data. A set of necessary conditions can be tested from estimated wage curves alone. Existing international evidence from empirical wage equations are re-interpreted in light of these conditions.

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File URL: http://www.svt.ntnu.no/iso/WP/2002/16nairu.pdf
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Bibliographic Info

Paper provided by Department of Economics, Norwegian University of Science and Technology in its series Working Paper Series with number 1602.

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Length: 15 pages
Date of creation: 25 Apr 2000
Date of revision: 30 Apr 2002
Handle: RePEc:nst:samfok:1602

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Keywords: Phillips curve; wage curve; steady state; natural rate; NAIRU; dynamic modelling;

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References

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  1. Layard, Richard & Nickell, Stephen, 1986. "Unemployment in Britain," Economica, London School of Economics and Political Science, vol. 53(210(S)), pages S121-69, Supplemen.
  2. Olivier Jean Blanchard & Lawrence Katz, 1999. "Wage Dynamics: Reconciling Theory and Evidence," NBER Working Papers 6924, National Bureau of Economic Research, Inc.
  3. David G. Blanchflower & Andrew J. Oswald, 1989. "The Wage Curve," NBER Working Papers 3181, National Bureau of Economic Research, Inc.
    • Blanchflower, D. & Oswald, A., 1989. "The Wage Curve," Papers 340, London School of Economics - Centre for Labour Economics.
  4. Robert J. Gordon, 1998. "Foundations of the Goldilocks Economy: Supply Shocks and the Time-Varying NAIRU," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 297-346.
  5. Rodseth,A. & Nymoen,R., 1999. "Nordic wage formation and unemployment seven years later," Memorandum 10/1999, Oslo University, Department of Economics.
  6. Blanchard, O & Katz, L, 1996. "What We Know and Do Not Know about the Natural Rate of Unemployment," Working papers 96-29, Massachusetts Institute of Technology (MIT), Department of Economics.
  7. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," CEPR Discussion Papers 2139, C.E.P.R. Discussion Papers.
  8. Nymoen, Ragnar, 1989. "Modelling Wages in the Small Open Economy: An Error-Correction Model of Norwegian Manufacturing Wages," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 51(3), pages 239-58, August.
  9. Svensson, L.E.O., 1998. "Open-Economy Inflation Targeting," Papers 638, Stockholm - International Economic Studies.
  10. Holden, Steinar & Nymoen, Ragnar, 2002. " Measuring Structural Unemployment: NAWRU Estimates in the Nordic Countries," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(1), pages 87-104.
  11. Nickell, Stephen J, 1987. "Why Is Wage Inflation in Britain So High?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 49(1), pages 103-28, February.
  12. Grubb, David B, 1986. "Topics in the OECD Phillips Curve," Economic Journal, Royal Economic Society, vol. 96(381), pages 55-79, March.
  13. DREZE, Jacques & BEAN, Charles, 1990. "Europe's employment problem: Introduction and synthesis," CORE Discussion Papers 1990041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  14. Paul G. Fisher & Gunnar BÅrdsen, 1999. "Economic theory and econometric dynamics in modelling wages and prices in the United Kingdom," Empirical Economics, Springer, vol. 24(3), pages 483-507.
  15. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345, September.
  16. Jeffrey C. Fuhrer, 1995. "The Phillips curve is alive and well," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 41-56.
  17. repec:fth:louvco:9041 is not listed on IDEAS
  18. Dag Kolsrud & Ragnar Nymoen, 1998. "Unemployment and the open economy wage-price spiral," Journal of Economic Studies, Emerald Group Publishing, vol. 25(6), pages 450-467, October.
  19. Johansen, Kare, 1995. "Norwegian Wage Curves," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(2), pages 229-47, May.
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Citations

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Cited by:
  1. Dobrescu, Emilian, 2004. "Double conditioned potential output," MPRA Paper 35769, University Library of Munich, Germany.
  2. Valerija Botric, 2012. "NAIRU estimates for Croatia," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics, vol. 30(1), pages 163-180.
  3. Bårdsen, Gunnar & den Reijer, Ard & Jonasson, Patrik & Nymoen, Ragnar, 2012. "MOSES: Model for studying the economy of Sweden," Economic Modelling, Elsevier, vol. 29(6), pages 2566-2582.
  4. Nymoen, Ragnar & Rygh Swensen, Anders & Tveter, Eivind, 2011. "Interpreting the evidence for New Keynesian models of inflation dynamics," Memorandum 23/2011, Oslo University, Department of Economics.
  5. Nymoen, Ragnar, 2005. "Evaluating a Central Bank’s Recent Forecast Failure," Memorandum 22/2005, Oslo University, Department of Economics.
  6. Victor Montuenga & Inmaculada Garcia, 2011. "The wage dynamics in Spain: evidence from individual data," ERSA conference papers ersa11p585, European Regional Science Association.

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