IDEAS home Printed from https://ideas.repec.org/a/bic/journl/v9y2009i2p25-46.html
   My bibliography  Save this article

Assessment of the natural rate of unemployment and capacity utilisation in Latvia

Author

Listed:
  • Aleksejs Meļihovs

    () (Monetary Policy Department, Bank of Latvia)

  • Anna Zasova

    () (Monetary Policy Department, Bank of Latvia)

Abstract

Inflation and its dynamics feature among the most important indicators in the focus of such economic agents as producers, consumers, investors, monetary and fiscal policy makers. Risks of high inflation or deflation enhance the need to profoundly investigate factors and causes of unfavourable inflation dynamics. Optimal capacity utilisation is one of the ways to escape endogenous pressures that increase inflation or cause deflation. This study pursues the aim of assessing short-term relationships between the capacity utilisation rate and inflation in Latvia. The authors have set a target to determine the capacity utilisation rate at which no pressure is exerted upon inflation and to show whether the capacity utilisation rate of the Latvian economy was an underlying factor that caused a rise in inflation after EU accession.

Suggested Citation

  • Aleksejs Meļihovs & Anna Zasova, 2009. "Assessment of the natural rate of unemployment and capacity utilisation in Latvia," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 9(2), pages 25-46, December.
  • Handle: RePEc:bic:journl:v:9:y:2009:i:2:p:25-46
    as

    Download full text from publisher

    File URL: http://biceps.org/assets/docs/bje/Assessment%20of%20the%20natural%20rate%20of%20unemployment.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Camille Logeay & Silke Tober, 2003. "Time-varying Nairu and Real Interest Rates in the Euro Area," Discussion Papers of DIW Berlin 351, DIW Berlin, German Institute for Economic Research.
    2. Robert J. Gordon, 1997. "The Time-Varying NAIRU and Its Implications for Economic Policy," Journal of Economic Perspectives, American Economic Association, pages 11-32.
    3. Marco Bianchi & Gylfi Zoega, 1998. "Unemployment persistence: does the size of the shock matter?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 13(3), pages 283-304.
    4. James K. Galbraith, 1997. "Time to Ditch the NAIRU," Journal of Economic Perspectives, American Economic Association, pages 93-108.
    5. Laurence Boone & Claude Giorno & Mara Meacci & Dave Rae & Pete Richardson & Dave Turner, 2003. "Estimating the structural rate of unemployment for the OECD countries," OECD Economic Studies, OECD Publishing, pages 171-216.
    6. Robert J. Gordon, 1997. "The Time-Varying NAIRU and Its Implications for Economic Policy," Journal of Economic Perspectives, American Economic Association, pages 11-32.
    7. Edmund S. Phelps, 1968. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 76, pages 678-678.
    8. Douglas Staiger & James H. Stock & Mark W. Watson, 1997. "The NAIRU, Unemployment and Monetary Policy," Journal of Economic Perspectives, American Economic Association, pages 33-49.
    9. Martins Bitans & Dace Slakota & Ivars Tillers, 2001. "Price Dynamics in Latvia - Experience and Future Prospects," Working Papers 2001/01, Latvijas Banka.
    10. Masso, Jaan & Staehr, Karsten, 2005. "Inflation dynamics and nominal adjustment in the Baltic States," Research in International Business and Finance, Elsevier, pages 281-303.
    11. Jørgen Elmeskov, 1993. "High and Persistent Unemployment: Assessment of the Problem and Its Causes," OECD Economics Department Working Papers 132, OECD Publishing.
    12. Ely, Jeffrey & Fudenberg, Drew & Levine, David K., 2008. "When is reputation bad?," Games and Economic Behavior, Elsevier, pages 498-526.
    13. Masso, Jaan & Staehr, Karsten, 2005. "Inflation dynamics and nominal adjustment in the Baltic States," Research in International Business and Finance, Elsevier, pages 281-303.
    14. Monnet, Cyril & Quintin, Erwan, 2007. "Why do financial systems differ? History matters," Journal of Monetary Economics, Elsevier, pages 1002-1017.
    15. Niek Nahuis, 2003. "An alternative demand indicator: the 'non-accelerating inflation rate of capacity utilization'," Applied Economics, Taylor & Francis Journals, vol. 35(11), pages 1339-1344.
    16. Joseph Stiglitz, 1997. "Reflections on the Natural Rate Hypothesis," Journal of Economic Perspectives, American Economic Association, pages 3-10.
    17. Laurence Ball & N. Gregory Mankiw, 2002. "The NAIRU in Theory and Practice," Journal of Economic Perspectives, American Economic Association, pages 115-136.
    18. Nienke Oomes & Oksana Dynnikova, 2006. "The Utilization-Adjusted Output Gap; Is the Russian Economy Overheating?," IMF Working Papers 06/68, International Monetary Fund.
    19. Aleksejs Melihovs & Anna Zasova, 2007. "Estimation of the Phillips Curve for Latvia," Working Papers 2007/03, Latvijas Banka.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Agnese Bicevska & Aleksejs Melihovs & Krista Kalnberzina, 2009. "Savings in Latvia," Discussion Papers 2009/01, Latvijas Banka.
    2. Olegs Krasnopjorovs, 2015. "Natural and Cyclical Unemployment in Latvia: New Insights from the Beveridge Curve Model," Discussion Papers 2015/02, Latvijas Banka.
    3. Olivier Blanchard & Mark Griffiths & Bertrand Gruss, 2013. "Boom, Bust, Recovery Forensics of the Latvia Crisis," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 47(2 (Fall)), pages 325-388.
    4. Farzana Shaheen & Azad Haider & Sajid Amin Javed, 2011. "Estimating Pakistan’s Time Varying Non-Accelerating Inflation Rate of Unemployment: An Unobserved Component Approach," International Journal of Economics and Financial Issues, Econjournals, pages 172-179.
    5. Olivier Blanchard & Mark Griffiths & Bertrand Gruss, 2013. "Boom, Bust, Recovery: Forensics of the Latvia Crisis," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, pages 325-388.
    6. Mihaela Simionescu, 2014. "The Kalman Filter Approach for Estimating the Natural Unemployment Rate in Romania," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, pages 148-159.

    More about this item

    Keywords

    NAIRU; NAIRCU; Kalman filter;

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bic:journl:v:9:y:2009:i:2:p:25-46. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lelde Jakobsone). General contact details of provider: http://edirc.repec.org/data/biceplv.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.