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NAWRU Estimation Using Structural Labour Market Indicators

Author

Listed:
  • Atanas Hristov
  • Christophe Planas
  • Werner Roeger
  • Alessandro Rossi

Abstract

The use of unobserved component models to estimate the NAWRU has been strongly criticized due to some excessive pro-cyclicality at the sample end, especially in the neighbourhood of turning points. To address this criticism, the European Commission now uses a model-based approach where the information set is augmented with a structural indicator of the labour market to which the NAWRU is supposed to converge in a certain number of years. The resulting NAWRU estimates mixes information about the business cycle and the labour market characteristics. The application to the EU Member States shows that besides moderating pro-cyclicality, this approach also reduces the first revision to the one- and two-year-ahead forecasts of the NAWRU in four-fifth of the countries considered.

Suggested Citation

  • Atanas Hristov & Christophe Planas & Werner Roeger & Alessandro Rossi, 2017. "NAWRU Estimation Using Structural Labour Market Indicators," European Economy - Discussion Papers 069, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  • Handle: RePEc:euf:dispap:069
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    1. Duarte, Cláudia & Maria, José R. & Sazedj, Sharmin, 2020. "Trends and cycles under changing economic conditions," Economic Modelling, Elsevier, vol. 92(C), pages 126-146.
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    5. Josef Baumgartner & Serguei Kaniovski & Simon Loretz, 2022. "Energiepreisschock trübt auch mittelfristig die Wirtschaftsaussichten. Mittelfristige Prognose 2023 bis 2027," WIFO Monatsberichte (monthly reports), WIFO, vol. 95(10), pages 643-661, October.
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    11. Josef Baumgartner & Serguei Kaniovski & Hans Pitlik, 2022. "Ukraine-Krieg trübt die mittelfristigen Wirtschaftsaussichten. Update der mittelfristigen Prognose 2022 bis 2026," WIFO Monatsberichte (monthly reports), WIFO, vol. 95(4), pages 233-245, April.
    12. Josef Baumgartner & Serguei Kaniovski & Hans Pitlik, 2023. "Österreichs Wirtschaft wächst mittelfristig nur verhalten. Mittelfristige Prognose 2024 bis 2028," WIFO Monatsberichte (monthly reports), WIFO, vol. 96(10), pages 667-683, October.
    13. Orlov, D. & Postnikov, E., 2022. "Phillips curve: Inflation and NAIRU in the Russian regions," Journal of the New Economic Association, New Economic Association, vol. 55(3), pages 61-80.
    14. Josef Baumgartner & Serguei Kaniovski & Christian Glocker & Walter Hyll & Hans Pitlik, 2020. "COVID-19-Pandemie dämpft die Konjunkturaussichten. Mittelfristige Prognose 2021 bis 2025," WIFO Monatsberichte (monthly reports), WIFO, vol. 93(10), pages 731-753, October.
    15. Josef Baumgartner & Serguei Kaniovski & Marian Fink & Hans Pitlik & Silvia Rocha-Akis, 2021. "Strong Private Consumption Spurs Economic Growth. Medium-term Forecast of the Austrian Economy 2022 to 2026 Including the Tax Reform 2022 2024," WIFO Reports on Austria, WIFO, issue 13, November.
    16. Groll, Dominik, 2017. "Deutliche Anzeichen für Anspannungen am Arbeitsmarkt," Kiel Insight 2017.19, Kiel Institute for the World Economy (IfW Kiel).
    17. Bofinger, Peter & Schnabel, Isabel & Feld, Lars P. & Schmidt, Christoph M. & Wieland, Volker, 2017. "Für eine zukunftsorientierte Wirtschaftspolitik. Jahresgutachten 2017/18 [Towards a Forward-Looking Economic Policy. Annual Report 2017/18]," Annual Economic Reports / Jahresgutachten, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, volume 127, number 201718.
    18. Breuer, Sebastian & Elstner, Steffen, 2017. "Die Wachstumsperspektiven der deutschen Wirtschaft vor dem Hintergrund des demografischen Wandels: Die Mittelfristprojektion des Sachverständigenrates," Working Papers 07/2017, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
    19. Ademmer, Martin & Boysen-Hogrefe, Jens & Carstensen, Kai & Hauber, Philipp & Jannsen, Nils & Kooths, Stefan & Rossian, Thies & Stolzenburg, Ulrich, 2019. "Schätzung von Produktionspotenzial und -lücke: Eine Analyse des EU-Verfahrens und mögliche Verbesserungen," Open Access Publications from Kiel Institute for the World Economy 193965, Kiel Institute for the World Economy (IfW).
    20. Ademmer, Martin & Boysen-Hogrefe, Jens & Carstensen, Kai & Hauber, Philipp & Jannsen, Nils & Kooths, Stefan & Rossian, Thies & Stolzenburg, Ulrich, 2019. "Schätzung von Produktionspotenzial und -lücke: Eine Analyse des EU-Verfahrens und mögliche Verbesserungen," Kieler Beiträge zur Wirtschaftspolitik 19, Kiel Institute for the World Economy (IfW Kiel).
    21. Josef Baumgartner & Serguei Kaniovski & Marian Fink & Margit Schratzenstaller, 2021. "Steuerreform 2022/2024 – Gesamtwirtschaftliche Wirkungen," WIFO Monatsberichte (monthly reports), WIFO, vol. 94(12), pages 883-898, December.
    22. Josef Baumgartner & Serguei Kaniovski & Marian Fink & Hans Pitlik & Silvia Rocha-Akis, 2021. "Starker privater Konsum treibt das Wirtschaftswachstum. Mittelfristige Prognose 2022 bis 2026 unter Berücksichtigung der Steuerreform 2022/2024," WIFO Monatsberichte (monthly reports), WIFO, vol. 94(10), pages 711-736, October.

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    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J0 - Labor and Demographic Economics - - General
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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