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The NAIRU and informality in the Mexican labor market

Author

Listed:
  • Ana Aguilar
  • Carlo Alcaraz
  • Claudia Ramírez
  • Cid Alonso Rodríguez-Pérez

Abstract

The non-accelerating inflation rate of unemployment (NAIRU) is not directly observable, and the presence of informal workers imposes an additional challenge in its estimation. In this paper, we present an estimation of the traditional NAIRU for Mexico and an alternative measure that includes informality as an indicator of labor underutilization. We find that both measures of NAIRU and the associated labor market slack indicators follow similar patterns over time. However, the slack estimated with the indicator that includes informality seems to predict inflationary pressures more accurately when the unemployment gap is close to zero.

Suggested Citation

  • Ana Aguilar & Carlo Alcaraz & Claudia Ramírez & Cid Alonso Rodríguez-Pérez, 2022. "The NAIRU and informality in the Mexican labor market," BIS Working Papers 1005, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:1005
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    References listed on IDEAS

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    Cited by:

    1. Lorenzo Aldeco Leo & Horacio Reyes Rocha, 2025. "An estimation of the Phillips curve in Mexico using city-level data," Working Papers 2025-14, Banco de México.

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    Keywords

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    JEL classification:

    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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