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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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File URL: http://www.ofce.sciences-po.fr/pdf/dtravail/WP2004-06.pdf
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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. Lawrence F. Katz & Olivier Blanchard, 1999. "Wage Dynamics: Reconciling Theory and Evidence," American Economic Review, American Economic Association, vol. 89(2), pages 69-74, May.
  2. 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.
  3. Henri Sterdyniak & Michèle Debonneuil, 1984. "La boucle prix-salaires dans l'inflation," Revue Économique, Programme National Persée, vol. 35(2), pages 267-312.
  4. Éric Heyer & Xavier Timbeau, 2002. "Le chômage structurel à 5 % en France ?," Revue de l'OFCE, Presses de Sciences-Po, vol. 80(1), pages 115-151.
  5. Odile Chagny & Frédéric Reynès & Henri Sterdyniak, 2002. "The equilibrium rate of unemployment : a theoretical discussion and an empirical evaluation for six OECD countries," Documents de Travail de l'OFCE 2002-04, Observatoire Francais des Conjonctures Economiques (OFCE).
  6. Henri Delessy & Philippine Cour & Hervé Le Bihan & Henri Sterdyniak, 1997. "Le taux de chômage d'équilibre, anciennes et nouvelles approches," Sciences Po publications info:hdl:2441/5268, Sciences Po.
  7. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," NBER Chapters, in: NBER Macroeconomics Annual 1986, Volume 1, pages 15-90 National Bureau of Economic Research, Inc.
  8. Henri Sterdyniak & Christine Rifflart & Olivier Passet, 1997. "Ralentissement de la croissance potentielle et hausse du chômage," Sciences Po publications info:hdl:2441/2476, Sciences Po.
  9. Eric Heyer & Frédéric Reynès & Henri Sterdyniak, 2004. "Variables observables et inobservables dans la théorie du taux de chômage d'équilibre : une comparaison France / Etats-Unis," Sciences Po publications N° 2004-03, Sciences Po.
  10. 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.
  11. Robert J. Gordon, 1996. "The Time-Varying NAIRU and its Implications for Economic Policy," NBER Working Papers 5735, National Bureau of Economic Research, Inc.
  12. Edmund S. Phelps, 1968. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 76, pages 678.
  13. Ricardo J. Caballero & Mohamad L. Hammour, 1997. "Jobless Growth: Appropriability, Factor Substitution, and Unemployment," NBER Working Papers 6221, National Bureau of Economic Research, Inc.
  14. Durbin, James & Koopman, Siem Jan, 2001. "Time Series Analysis by State Space Methods," OUP Catalogue, Oxford University Press, number 9780198523543, March.
  15. Henri Delessy & Philippine Cour & Hervé Le Bihan & Henri Sterdyniak, 1997. "Le taux de chômage d'équilibre, anciennes et nouvelles approches," Sciences Po publications info:hdl:2441/5268, Sciences Po.
  16. 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.
  17. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345, March.
  18. Irac, D., 2000. "Estimation of a Time Varying NAIRU for France," Working papers 75, Banque de France.
  19. 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.
  20. Frédéric Lerais & Hervé Le Bihan & Eric Heyer, 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.
  21. Caballero, Ricardo J & Engel, Eduardo M R A & Haltiwanger, John, 1997. "Aggregate Employment Dynamics: Building from Microeconomic Evidence," American Economic Review, American Economic Association, vol. 87(1), pages 115-37, March.
  22. Laurence Ball, 1993. "What Determines the Sacrifice Ratio?," NBER Working Papers 4306, National Bureau of Economic Research, Inc.
  23. 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.
  24. N. Gregory Mankiw, 1994. "Monetary Policy," NBER Books, National Bureau of Economic Research, Inc, number greg94-1.
  25. Assar Lindbeck, 1993. "Unemployment and Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121751, June.
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