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Estimating the NAIRU for Chile

  • Jorge E. Restrepo L.
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    The purpose of this paper is to obtain a set of estimates of the non-accelerating-inflation rate of unemployment (NAIRU) for Chile. Measuring the NAIRU permits building the unemployment gap, which is a complementary measure of activity and output gap, which is used on a regular basis by central banks as another indicator helping in inflation forecasts and policy decision making. Initially, an estimate is obtained based on a purely statistical method (unobserved components) Later, estimates are conducted for both constant and variable NAIRU based on Phillips curve equations. The different estimates yield similar results, indicating that the most likely point estimate for the current NAIRU stands between 7.4% and 8.3%. However, these figures are contained in a confidence interval ranging from 6.5% to 9.7%, reflecting great uncertainty regarding the exact value of NAIRU.

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    Article provided by Central Bank of Chile in its journal Economía Chilena.

    Volume (Year): 11 (2008)
    Issue (Month): 2 (August)
    Pages: 31-46

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    Handle: RePEc:chb:bcchec:v:11:y:2008:i:2:p:31-46
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