Measuring the NAIRU: a complementary approach

Marie-Elisabeth de la Serve and Matthieu Lemoine

Working papers from Banque de France

Abstract: Estimates of the Nairu generally suffer from a large uncertainty, which can be reduced by adopting a bivariate framework and assuming that shifts of the Phillips curve share a common trend with the unemployment rate. We consider in this paper if this common trend assumption is empirically relevant or not for seven economies over the sample 1973-2010. First, it appears that the Nairu can substantially differ from the unemployment trend. Second, relaxing the common trend assumption improves the fit of the inflation equation. Third, this assumption is necessary for getting an important reduction of uncertainty in a bivariate framework.

Keywords: Nairu; inflation; uncertainty. (search for similar items in EconPapers)
JEL-codes: C32 E24 E31 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2011
New Economics Papers: this item is included in nep-cba
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:342

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