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The Natural Unemployment Rate in Australia since the Seventies


  • Groenewold, Nicolaas
  • Hagger, A J


The natural rate of unemployment is calculated based on D. M. Lilien's (1982) notion that an increase in the sectoral dispersion of demand results in a rise in unemployment for a given level of aggregate demand. In contrast to earlier applications, the dispersion measure is based on sectoral employment growth rates purged of aggregate influences using a VAR model. The authors find that most of the rise in unemployment in Australia since the 1970s reflects the increase in the underlying natural rate. This finding is broadly consistent with Lilien's results for the United States as well as earlier results for Australia and Canada. Copyright 1998 by The Economic Society of Australia.

Suggested Citation

  • Groenewold, Nicolaas & Hagger, A J, 1998. "The Natural Unemployment Rate in Australia since the Seventies," The Economic Record, The Economic Society of Australia, vol. 74(224), pages 24-35, March.
  • Handle: RePEc:bla:ecorec:v:74:y:1998:i:224:p:24-35

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    References listed on IDEAS

    1. Martin Eichenbaum & Charles L. Evans, 1995. "Some Empirical Evidence on the Effects of Shocks to Monetary Policy on Exchange Rates," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 975-1009.
    2. Matthew D. Shapiro, 1986. "The Dynamic Demand for Capital and Labor," The Quarterly Journal of Economics, Oxford University Press, vol. 101(3), pages 513-542.
    3. Pesaran, M. H. & Shin, Y. & Smith, R. J., 1996. "Testing for the 'Existence of a Long-run Relationship'," Cambridge Working Papers in Economics 9622, Faculty of Economics, University of Cambridge.
    4. Glenn D. Rudebusch, 1995. "What are the lags in monetary policy?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue feb3.
    5. repec:crs:wpaper:9645 is not listed on IDEAS
    6. David Gruen & Geoffrey Shuetrim, 1994. "Internationalisation and the Macroeconomy," RBA Annual Conference Volume,in: Philip Lowe & Jacqueline Dwyer (ed.), International Intergration of the Australian Economy Reserve Bank of Australia.
    7. Tro Kortian & James O’Regan, 1996. "Australian Financial Market Volatility: An Exploration of Cross-country and Cross-market Linkages," RBA Research Discussion Papers rdp9609, Reserve Bank of Australia.
    8. Stephen Grenville, 1996. "Recent Developments in Monetary Policy: Australia and Abroad," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 29(1), pages 29-39.
    9. Gordon de Brouwer & John Romalis, 1996. "External Influences on Output: An Industry Analysis," RBA Research Discussion Papers rdp9612, Reserve Bank of Australia.
    10. Philip Lowe, 1995. "The Link between the Cash Rate and Market Interest Rates," RBA Research Discussion Papers rdp9504, Reserve Bank of Australia.
    11. Nicolas de Roos & Bill Russell, 1996. "Towards an Understanding of Australia’s Co-movement with Foreign Business Cycles," RBA Research Discussion Papers rdp9607, Reserve Bank of Australia.
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    Cited by:

    1. Yanggyu Byun & Hae-shin Hwang, 2015. "Sectoral shifts or aggregate shocks? A new test of sectoral shifts hypothesis," Empirical Economics, Springer, vol. 49(2), pages 481-502, September.
    2. De-Chih Liu, 2011. "Hysteresis Hypothesis in Job Creation and Destruction: Evidence from the U.S," Annals of Economics and Finance, Society for AEF, vol. 12(2), pages 389-409, November.
    3. Marika Karanassou & Hector Sala, 2010. "Labour Market Dynamics in Australia: What Drives Unemployment?," The Economic Record, The Economic Society of Australia, vol. 86(273), pages 185-209, June.
    4. Le, Anh T & Miller, Paul W, 2000. "Australia's Unemployment Problem," The Economic Record, The Economic Society of Australia, vol. 76(232), pages 74-104, March.
    5. David Shepherd & Robert Dixon, 2002. "The Relationship Between Regional and National Unemployment," Regional Studies, Taylor & Francis Journals, vol. 36(5), pages 469-480.
    6. Dixon, Robert & Shepherd, David, 2001. "Trends and Cycles in Australian State and Territory Unemployment Rates," The Economic Record, The Economic Society of Australia, vol. 77(238), pages 252-269, September.
    7. N. Groenewold & A.J. Hagger, 1998. "The Australian Natural Rate of Unemployment: Some estimates from a structural VAR," Economics Discussion / Working Papers 98-23, The University of Western Australia, Department of Economics.

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