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Measuring the NAIRU – a structural VAR approach

Author

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  • Hongmei Zhao
  • Vincent (Vincent Peter) Hogan

Abstract

We calculate the NAIRU for the U.S. in a framework where inflation and the unemployment rate can respond to each other. The NAIRU is defined as the component of the actual unemployment rate that is uncorrelated with inflation in the long run. Using a structural VAR approach, the NAIRU and core inflation can be estimated simultaneously. Our estimation results show that the NAIRU falls dramatically at the end of 1990s and the long run vertical Phillips Curve shifts back from 6.8 per cent before 1997 to 4 per cent afterwards.

Suggested Citation

  • Hongmei Zhao & Vincent (Vincent Peter) Hogan, 2006. "Measuring the NAIRU – a structural VAR approach," Working Papers 200617, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:wpaper:200617
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    File URL: http://hdl.handle.net/10197/331
    File Function: First version, 2006
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    Keywords

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    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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