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Estimating the natural rate of unemployment in euro-area countries with co-integrated systems

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  • Sven Schreiber

Abstract

Given that for France, Germany, Italy and the Netherlands the unemployment rates are best classified as I (1), we apply permanent-transitory decompositions based on co-integrated Vector Autoregressions (VAR) with relevant variables (labour productivity, wages, tax wedges, foreign relative prices) to estimate the time-varying natural unemployment rates. In general all variables seem to matter, and the results are quite different from published Organization for Economic Co-operation and Development (OECD) Nairus. Our implied unemployment gaps are better than the OECD gaps in predicting unemployment changes and inflation gaps, but they are (except for Italy) as bad as the OECD gaps for forecasting inflation changes.

Suggested Citation

  • Sven Schreiber, 2012. "Estimating the natural rate of unemployment in euro-area countries with co-integrated systems," Applied Economics, Taylor & Francis Journals, vol. 44(10), pages 1315-1335, April.
  • Handle: RePEc:taf:applec:44:y:2012:i:10:p:1315-1335
    DOI: 10.1080/00036846.2010.539548
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    Cited by:

    1. Mihaela Simionescu, 2014. "The Kalman Filter Approach for Estimating the Natural Unemployment Rate in Romania," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 10(1), pages 148-159, February.
    2. Wolfgang Pollan, 2013. "US Inflation and Crude Oil Prices. An International Perspective," WIFO Working Papers 451, WIFO.

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