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Estimating The Natural Rate Of Hours

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  • Berger, Tino
  • Vierke, Hauke

Abstract

This paper proposes an alternative measure for the slack of the aggregate labor market. The natural rate of hours holds valuable information about the state of the labor market that is not reflected by conventional measures, such as the equilibrium rate of unemployment, because it takes the intensive margin into account and is robust to variations in labor force participation. We set up and estimate a multivariate unobserved-components model using information on GDP, inflation, and hours worked, and apply it to the United States and Germany. The estimated hours gap outperforms conventional unemployment gap measures in a Taylor rule by formal model comparison.

Suggested Citation

  • Berger, Tino & Vierke, Hauke, 2017. "Estimating The Natural Rate Of Hours," Macroeconomic Dynamics, Cambridge University Press, vol. 21(6), pages 1426-1453, September.
    • Handle: RePEc:cup:macdyn:v:21:y:2017:i:06:p:1426-1453_00
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    Cited by:

    1. Berger, Tino & Morley, James & Wong, Benjamin, 2023. "Nowcasting the output gap," Journal of Econometrics, Elsevier, vol. 232(1), pages 18-34.
      • Tino Berger & James Morley & Benjamin Wong, 2020. "Nowcasting the output gap," CAMA Working Papers 2020-78, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    2. Gehrke, Britta & Weber, Enzo, 2018. "Identifying asymmetric effects of labor market reforms," European Economic Review, Elsevier, vol. 110(C), pages 18-40.

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