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Estimating a New Zealand NAIRU

  • Kam Leong Szeto
  • Melody Guy

    ()

    (New Zealand Treasury)

Registered author(s):

    This paper estimates the non-increasing inflation rate of unemployment or NAIRU for New Zealand. A NAIRU that varies over time has important implications in considering inflationary pressures. This paper estimates the time-varying NAIRU using a Kalman filter on a reduced form approach and extends previous studies in several ways. Using different model specifications and dependent variables suggests a band of NAIRU estimates of between four and five percent (with further error bands around that). The results of this paper indicate that the NAIRU is a relevant concept and the unemployment gap should be one of the factors considered when assessing inflationary pressure.

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    File URL: http://www.treasury.govt.nz/publications/research-policy/wp/2004/04-10/twp04-10.pdf
    Download Restriction: no

    Paper provided by New Zealand Treasury in its series Treasury Working Paper Series with number 04/10.

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    Length: 23 pages
    Date of creation: Sep 2004
    Date of revision:
    Handle: RePEc:nzt:nztwps:04/10
    Contact details of provider: Postal: New Zealand Treasury, PO Box 3724, Wellington, New Zealand
    Phone: +64-4-472 2733
    Fax: +64-4-473 0982
    Web page: http://www.treasury.govt.nz

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    1. 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.
    2. Laurence Ball & N. Gregory Mankiw, 2002. "The NAIRU in Theory and Practice," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 115-136, Fall.
    3. Andrews, Donald W K & Ploberger, Werner, 1994. "Optimal Tests When a Nuisance Parameter Is Present Only under the Alternative," Econometrica, Econometric Society, vol. 62(6), pages 1383-1414, November.
    4. Skalin, Joakim & Teräsvirta, Timo, 1998. "Modelling asymmetries and moving equilibria in unemployment rates," SSE/EFI Working Paper Series in Economics and Finance 262, Stockholm School of Economics, revised 05 Oct 1998.
    5. repec:cup:macdyn:v:6:y:2002:i:2:p:202-41 is not listed on IDEAS
    6. Robert J. Gordon, 1996. "The Time-Varying NAIRU and its Implications for Economic Policy," NBER Working Papers 5735, National Bureau of Economic Research, Inc.
    7. 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.
    8. Joseph Stiglitz, 1997. "Reflections on the Natural Rate Hypothesis," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 3-10, Winter.
    9. 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.
    10. Fabiani, Silvia & Mestre, Ricardo, 2000. "Alternative measures of the NAIRU in the euro area: estimates and assessment," Working Paper Series 0017, European Central Bank.
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