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Measuring the NAIRU in the Spanish Economy

  • Ángel Estrada

    (Banco de España)

  • Ignacio Hernando

    (Banco de España)

  • J. David López-Salido

    (Banco de España)

This paper addresses the issue of measuring the NAIRU in the Spanish economy. We implement some of the procedures proposed in the literature to estimate the NAIRU, describing their advantages and disadvantages. Our analysis shows that these alternative approaches provide significantly different point estimates of the NAIRU. Moreover, whenever some measures of the precision of the estimate are available, the degree of uncertainty is remarkable. Thus, our main conclusion is that the usefulness of the NAIRU concept as a general guideline for discussing and analyzing macroeconomic policy is very limited, given the current state of economic research on this area.

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Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0009.

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Length: 59 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:bde:wpaper:0009
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  1. Jordi Gali & Mark Gertler, 2000. "Inflation Dynamics: A Structural Econometric Analysis," NBER Working Papers 7551, National Bureau of Economic Research, Inc.
  2. Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbance," Working papers 497, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. P. McAdam & K. Mc Morrow, 1999. "The NAIRU Concept - Measurement uncertainties, hysteresis and economic policy role," European Economy - Economic Papers 136, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
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  8. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
  9. Douglas Staiger & James H. Stock & Mark W. Watson, 1996. "How Precise are Estimates of the Natural Rate of Unemployment?," NBER Working Papers 5477, National Bureau of Economic Research, Inc.
  10. Dolado, Juan J. & Jimeno, Juan F., 1997. "The causes of Spanish unemployment: A structural VAR approach," European Economic Review, Elsevier, vol. 41(7), pages 1281-1307, July.
  11. Fabiani, Silvia & Mestre, Ricardo, 2000. "Alternative measures of the NAIRU in the euro area: estimates and assessment," Working Paper Series 0017, European Central Bank.
  12. Coenen, Gunter & Wieland, Volker, 2005. "A small estimated euro area model with rational expectations and nominal rigidities," European Economic Review, Elsevier, vol. 49(5), pages 1081-1104, July.
  13. Regina Kaiser & Agustín Maravall, 1999. "Short-Term and Long-Term Trends, Seasonal Adjustment, and the Business Cycles," Banco de Espa�a Working Papers 9918, Banco de Espa�a.
  14. Robert J. Gordon, 1997. "The Time-Varying NAIRU and Its Implications for Economic Policy," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 11-32, Winter.
  15. Kevin X. D. Huang & Zheng Liu, 1998. "Staggered contracts and business cycle persistence," Discussion Paper / Institute for Empirical Macroeconomics 127, Federal Reserve Bank of Minneapolis.
  16. John M. Roberts, 1990. "The sources of business cycles: a monetarist interpretation," Working Paper Series / Economic Activity Section 108, Board of Governors of the Federal Reserve System (U.S.).
  17. Juan J. Dolado & J. David López-Salido & Juan L. Vega, 2000. "Unemployment and inflation persistence in Spain: Are there Phillips trade-offs?," Spanish Economic Review, Springer, vol. 2(3), pages 267-291.
  18. Blanchard, Olivier & Jimeno, Juan F, 1995. "Structural Unemployment: Spain versus Portugal," American Economic Review, American Economic Association, vol. 85(2), pages 212-18, May.
  19. Jinill Kim, 1998. "Monetary policy in a stochastic equilibrium model with real and nominal rigidities," Finance and Economics Discussion Series 1998-02, Board of Governors of the Federal Reserve System (U.S.).
  20. Bergin, Paul R. & Feenstra, Robert C., 2000. "Staggered price setting, translog preferences, and endogenous persistence," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 657-680, June.
  21. repec:fda:fdaeee:31 is not listed on IDEAS
  22. Fuhrer, Jeffrey C & Moore, George R, 1995. "Forward-Looking Behavior and the Stability of a Conventional Monetary Policy Rule," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 1060-70, November.
  23. Beatriz Rodríguez Prado, 1995. "La tasa natural de desempleo en la economía española: un intento de cuantificación," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 3, pages 133-151, Junio.
  24. Joseph Stiglitz, 1997. "Reflections on the Natural Rate Hypothesis," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 3-10, Winter.
  25. Ana R. de Lamo & Juan J. Dolado, 1993. "Un modelo del mercado de trabajo y la restricción de oferta en la economía española," Investigaciones Economicas, Fundación SEPI, vol. 17(1), pages 87-118, January.
  26. Javier Andrés & Ignacio Hernando & David López-Salido, 1998. "The Long-Run Effect of Permanent Disinflations," Banco de Espa�a Working Papers 9825, Banco de Espa�a.
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