The non-accelerating inflation rate of unemployment (NAIRU) in a small open economy: The irish context
AbstractIn Ireland the link between real disequilibrium (such as the unemployment gap) and inflation (either price or wage) is blurred by external factors, operating through traded goods price inflation. Attempts to extract information about the unobservable NAIRU from aggregate inflation measures, such as the HICP or wages inflation, are likely to be swamped by these external factors. This paper uses a measure of ‘domestically generated’ inflation (defined as the gap between the services inflation rate and the goods inflation rate), to capture domestic inflationary pressures arising from the labour market. A strong relationship is seen to exist between ‘domestically generated’ inflation and labour market tightness. The results also suggest that the NAIRU may not have varied significantly since 1979, despite the large movements in unemployment over the same period.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 11363.
Date of creation: Dec 1999
Date of revision:
Publication status: Published in Central Bank and Financial Services Authority of Ireland Technical Paper Series 5/RT/99.1999(1999): pp. 1-67
Ireland; unemployment ; inflation ; traded goods ; NAIRU domestically generated inflation;
Other versions of this item:
- Meyler, Aidan, 1999. "The Non-Accelerating Inflation Rate of Unemployment (NAIRU) in a Small Open Economy: The Irish Context," Research Technical Papers 5/RT/99, Central Bank of Ireland.
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
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