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Observable and unobservable variables in the theory of the equilibrium rate of unemployment, a comparison between France and the United States

This paper confronts, theoretically and empirically, two estimation methods for the Equilibrium Rate of Unemployment (ERU). By introducing observable variables into the TV-NAIRU approach and unobservable variables into the structural approach, we show how these two methods can converge even though their diagnoses differ appreciably in the French case. We considerably improve the econometric and explanatory properties of the French TV-NAIRU model by identifying some of its determinants (interest rates, labour productivity). Moreover, by distinguishing between the concepts of long-term and medium-term ERU, we separate the medium- from the long-term and the observable from the unobservable components of the ERU.

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Paper provided by Observatoire Francais des Conjonctures Economiques (OFCE) in its series Documents de Travail de l'OFCE with number 2004-06.

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Date of creation: 2004
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Handle: RePEc:fce:doctra:0406
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  1. Eric Heyer & Frédéric Reynès & Henri Sterdyniak, 2005. "Variables observables et inobservables dans la théorie du taux de chômage d'équilibre, une comparaison France / Etats-Unis," Post-Print hal-01304310, HAL.
  2. Ricardo J. Caballero & Eduardo M.R.A. Engel & John Haltiwanger, 1995. "Aggregate Employment Dynamics: Building From Microeconomic Evidence," NBER Working Papers 5042, National Bureau of Economic Research, Inc.
  3. Edmund S. Phelps, 1968. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 76, pages 678.
  4. Robert J. Gordon, 1998. "Foundations of the Goldilocks Economy: Supply Shocks and the Time-Varying NAIRU," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 297-346.
  5. Odile Chagny & Frédéric Reynès & Henri Sterdyniak, 2002. "The equilibrium rate of unemployment : a theoretical discussion and an empirical evaluation for six OECD countries," Working Papers hal-01027421, HAL.
  6. Assar Lindbeck, 1993. "Unemployment and Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121751, December.
  7. Camille Logeay & Silke Tober, 2003. "Time-varying Nairu and Real Interest Rates in the Euro Area," Discussion Papers of DIW Berlin 351, DIW Berlin, German Institute for Economic Research.
  8. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," Working papers 427, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Laurence Ball, 1993. "What Determines the Sacrifice Ratio?," NBER Working Papers 4306, National Bureau of Economic Research, Inc.
  10. Olivier Passet & Christine Rifflart & Henri Sterdyniak, 1997. "Ralentissement de la croissance potentielle et hausse du chômage," Revue de l'OFCE, Programme National Persée, vol. 60(1), pages 109-146.
  11. Gordon, Robert J, 1996. "The Time-varying NAIRU and its Implications for Economic Policy," CEPR Discussion Papers 1492, C.E.P.R. Discussion Papers.
  12. repec:spo:wpecon:info:hdl:2441/1625 is not listed on IDEAS
  13. 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.
  14. Eric Heyer & Hervé Le Bihan & Frédéric Lerais, 2000. "Relation de Phillips, boucle prix-salaire : une estimation par la méthode de Johansen," Économie et Prévision, Programme National Persée, vol. 146(5), pages 43-60.
  15. Caballero, R.J. & Hammour, M.L., 1997. "Jobless Growth: Appropriability, Factor-Substitution, and Unemployment," Working papers 97-18, Massachusetts Institute of Technology (MIT), Department of Economics.
  16. Eric Heyer & Xavier Timbeau, 2002. "Le chômage structurel à 5% en France ?," Post-Print hal-01017735, HAL.
  17. Durbin, James & Koopman, Siem Jan, 2001. "Time Series Analysis by State Space Methods," OUP Catalogue, Oxford University Press, number 9780198523543, December.
  18. repec:spo:wpecon:info:hdl:2441/2476 is not listed on IDEAS
  19. Irac, D., 2000. "Estimation of a Time Varying NAIRU for France," Working papers 75, Banque de France.
  20. Olivier Jean Blanchard & Lawrence Katz, 1999. "Wage Dynamics: Reconciling Theory and Evidence," NBER Working Papers 6924, National Bureau of Economic Research, Inc.
  21. Thomas Laubach, 2001. "Measuring The NAIRU: Evidence From Seven Economies," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 218-231, May.
  22. Pete Richardson & Laurence Boone & Claude Giorno & Mara Meacci & David Rae & David Turner, 2000. "The Concept, Policy Use and Measurement of Structural Unemployment: Estimating a Time Varying NAIRU Across 21 OECD Countries," OECD Economics Department Working Papers 250, OECD Publishing.
  23. Henri Sterdyniak & Michèle Debonneuil, 1984. "La boucle prix-salaires dans l'inflation," Revue Économique, Programme National Persée, vol. 35(2), pages 267-312.
  24. repec:spo:wpecon:info:hdl:2441/2005 is not listed on IDEAS
  25. N. Gregory Mankiw, 1994. "Monetary Policy," NBER Books, National Bureau of Economic Research, Inc, number greg94-1, September.
  26. Robert J. Gordon & Stephen R. King, 1982. "The Output Cost of Disinflation in Traditional and Vector Autoregressive Models," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 13(1), pages 205-244.
  27. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173, December.
  28. repec:spo:wpecon:info:hdl:2441/1905 is not listed on IDEAS
  29. K.Mc Morrow & W. Roeger, 2000. "Time-varying Nairu/Nawru estimates for the EU Member States," European Economy - Economic Papers 2008 - 2015 145, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
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