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Estimating Pakistan’s Time Varying Non-Accelerating Inflation Rate of Unemployment: An Unobserved Component Approach

  • Farzana Shaheen

    (School of Social Sciences Federal Urdu University of Arts, Sciences and Technology Islamabad, Pakistan.)

  • Azad Haider

    (School of Economics, Quaid-e-Azam University, Islamabad, Pakistan.)

  • Sajid Amin Javed

    (School of Economics, International Islamic University, Islamabad, Pakistan.)

This paper envisages estimating the Time-Varying Non-Accelerating Inflation Rate of Unemployment (TV-NAIRU) as an unobserved stochastic variable for Pakistan over the time period 1973-74 to 2007-08 using Kalman filter. Results of the study are evident that TV-NAIRU increased from 5.3 percent (1990-91) to 8.12 percent (2004-05) and falls to 6.17 percent again in 2007-08 which is above the actual unemployment rate. The results also indicate that the NAIRU is a relevant concept and the unemployment gap should be one of the factors considered when assessing inflationary pressure in Pakistan.

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Article provided by Econjournals in its journal International Journal of Economics and Financial Issues.

Volume (Year): 1 (2011)
Issue (Month): 4 ()
Pages: 172-179

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Handle: RePEc:eco:journ1:2011-04-4
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