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The Natural Rate of Unemployment in Brazil, Chile, Colombia and Venezuela: some results and challenges


  • Tito Nícias Teixeira da Silva Filho


This paper summarises the research results obtained by the group of central banks (Brazil, Chile, Colombia and Venezuela) that joined the research program on the Natural Rate of Unemployment – under the coordination of the Central Bank of Brazil – within the Joint Investigation on Non Observable Variables Project, and whose final results were presented at the XII Meeting of the Network of America Central Bank Researchers (CEMLA) held at Madrid in November 2007. The evidence obtained shows that the natural rate of unemployment is estimated with great uncertainty: besides sizable parameter uncertainty, estimates are very sensitive to the particular method used. This marked imprecision reflects the difficulties and challenges involved in the natural rate’s estimation. Nonetheless, the research also shows that there seems to be much room available for improvement, especially those stemming from a more careful modelling process and better care with the data, particularly regarding supply shocks proxies, given their importance in inflation dynamics. Indeed, this “channel” seems to be the most promising one to both narrow down the uncertainty about the NAIRU and improve the reliability of inferences.

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  • Tito Nícias Teixeira da Silva Filho, 2010. "The Natural Rate of Unemployment in Brazil, Chile, Colombia and Venezuela: some results and challenges," Working Papers Series 212, Central Bank of Brazil, Research Department.
  • Handle: RePEc:bcb:wpaper:212

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    References listed on IDEAS

    1. Gavin, William T. & Mandal, Rachel J., 2003. "Evaluating FOMC forecasts," International Journal of Forecasting, Elsevier, vol. 19(4), pages 655-667.
    2. Luis Eduardo Arango & Carlos Esteban Posada & Andrés Felipe García, 2007. "Inflación y desempleo en Colombia: NAIRU y tasa de desempleo compatible con alcanzar la meta de inflación (1984-2005)," Borradores de Economia 453, Banco de la Republica de Colombia.
    3. Jorge E. Restrepo, 2008. "Estimaciones de NAIRU para Chile," Investigación Conjunta-Joint Research,in: Centro de Estudios Monetarios Latinoamericanos (CEMLA) (ed.), Estimación y Uso de Variables no Observables en la Región, edition 1, volume 1, chapter 16, pages 492-516 Centro de Estudios Monetarios Latinoamericanos, CEMLA.
    4. Laurence Ball & N. Gregory Mankiw, 2002. "The NAIRU in Theory and Practice," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 115-136, Fall.
    5. Douglas O. Staiger & James H. Stock & Mark W. Watson, 1997. "How Precise Are Estimates of the Natural Rate of Unemployment?," NBER Chapters,in: Reducing Inflation: Motivation and Strategy, pages 195-246 National Bureau of Economic Research, Inc.
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