Is there a NAIRU for the Netherlands?
The Non-Accelerating Inflation Rate of Unemployment (NAIRU) is an appealing theoretical concept with strong macroeconomic policy implications. In practice, NAIRU's can be computed from estimated wage and price equations running in growth rates or in levels. In this paper we specify and estimate wage and price equations that enable NAIRU computation using quarterly data for the Netherlands over the period 1978 up to and including 1993. Our results are disappointing: the elementary requirements of economic plausibility and statistical significance prohibit NAIRU computation for the Netherlands. The specification of the estimated equations, i.e. in growth rates or in levels, does not matter in this respect.
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