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Estimating the NAIRU using both the Phillips and the Beveridge curves

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  • David Elkayam

    (Bank of Israel)

  • Alex Ilek

    (Bank of Israel)

Abstract

We use both the Phillips curve (the relationship between inflation and unemployment) and the Beveridge curve (the relationship between unemployment and job vacancies) to estimate a time-varying NAIRU for Israel in the period from 1998:Q1 to 2012:Q4. After applying prior restrictions on NAIRU volatility, based on economic reasoning, we found that both relationships make a noticeable contribution to the identification of the NAIRU. The estimation results show a prolonged decline of the NAIRU from 2003 until 2012, which could be attributed to government policy that was operated since 2002, which aimed to increase the efficiency of the labor market.

Suggested Citation

  • David Elkayam & Alex Ilek, 2013. "Estimating the NAIRU using both the Phillips and the Beveridge curves," Bank of Israel Working Papers 2013.10, Bank of Israel.
    • Handle: RePEc:boi:wpaper:2013.10
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    File URL: https://boiwebrepec.azurefd.net/RePEc/boi/wpaper/WP_2013.10.pdf
    File Function: First version, 2013
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    Cited by:

    1. Bank for International Settlements, 2023. "Inflation and labour markets," BIS Papers, Bank for International Settlements, number 142.

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