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Empirical Estimates of the NAIRU

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  • Jakob B. Madsen

Abstract

. Empirical studies have found that the non‐accelerating inflation rate of unemployment (NAIRU) has been fluctuating in OECD countries around a constant mean of several percentage points over the past decades. This mean is calculated from the constant terms carried over from the wage and price growth equations. In this paper it is shown that a high proportion of the constant term is a statistical artefact and suggests a new method which yields approximately unbiased estimates of the time‐invariant NAIRU. Using data for OECD countries it is shown that the constant‐term correction lowers the unadjusted time‐invariant NAIRU by approximately half.

Suggested Citation

  • Jakob B. Madsen, 2005. "Empirical Estimates of the NAIRU," LABOUR, CEIS, vol. 19(3), pages 563-593, September.
    • Handle: RePEc:bla:labour:v:19:y:2005:i:3:p:563-593
    DOI: 10.1111/j.1467-9914.2005.00307.x
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    References listed on IDEAS

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    1. Pasi Holm & Helina Somervouri, 1997. "Structural Unemployment in Finland," OECD Economics Department Working Papers 177, OECD Publishing.
    2. Holm, Pasi & Somervuori, Elina, 1997. "Structural Unemployment in Finland," Discussion Papers 136, VATT Institute for Economic Research.
    3. 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.
    4. George A. Kahn & Stuart E. Weiner, 1990. "Has the cost of disinflation declined?," Economic Review, Federal Reserve Bank of Kansas City, vol. 75(May), pages 5-24.
    5. Karl Pichelmann & Andreas Ulrich Schuh, 1997. "The NAIRU-Concept: A Few Remarks," OECD Economics Department Working Papers 178, OECD Publishing.
    6. Geoffrey M. B. Tootell, 1994. "Restructuring, the NAIRU, and the Phillips curve," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 31-44.
    7. Fumihira Nishizaki, 1997. "The NAIRU in Japan: Measurement and Its Implications," OECD Economics Department Working Papers 173, OECD Publishing.
    8. Silvia Fabiani & Alberto Locarno & Gian Paolo Oneto & Paolo Sestito, 1997. "NAIRU: Incomes Policy and Inflation," OECD Economics Department Working Papers 187, OECD Publishing.
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    Cited by:

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    2. Şanlı, Devran, 2018. "Macroeconomic Unstables and the Rate of Natural Unemployement: The Study of OECD and Turkish Economy 1980-2016," Bulletin of Economic Theory and Analysis, BETA Journals, vol. 3(3), pages 159-174, September.

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