The Nairu, Unemployment and the Rate of Inflation in Brazil

Elcyon Lima

No 94, Discussion Papers from Instituto de Pesquisa Econômica Aplicada - IPEA

Abstract: This paper estimates the Brazilian Nairu (Non-Accelerating Inflation Rate of Unemployment) and investigates several empirical questions: the behavior of Nairu along time, error bands for Nairu and the usefulness of Nairu to the conduct of monetary policy in Brazil. There are many recent studies about the Nairu ¾ Staiger, Stock and Watson (1997), Blanchard and Katz (1997) and Portugal, Madalozzo and Hillbrecht (1999). This article innovates with respect to previous ones because it adopts an econometric model that, in our judgment, is more adequate to deal with the still recent instability of Brazilian economy. We estimate two different state-space models: one with ARCH residuals and another with a Markov- switching regime. The article presents some new evidence on several questions. It shows that the Nairu has been increasing since 1995. It concludes that there is a statistically significant relationship, with correct sign, between deviations of unemployment from the Nairu and inflation. It also shows that the usefulness of the Nairu to the conduct of monetary policy is very limited because its error bands are too wide. Neste artigo estimamos a Non-Accelerating Inflation Rate of Unemployment (Nairu) do Brasil e investigamos diversas questões empíricas: o comportamento da Nairu ao longo do tempo, intervalos de confiança para a Nairu e sua utilidade na condução da política monetária no Brasil. Há diversos estudos recentes sobre a Nairu ¾ Staiger, Stock e Watson (1997), Blanchard e Katz (1997) e Portugal, Madalozzo e Hillbrecht (1999). Este artigo inova em relação aos demais ao adotar procedimentos econométricos que, na nossa opinião, são mais adequados para lidar com a instabilidade vivida pela economia brasileira em período recente. Estimamos dois modelos em espaço-deestados diferentes: um com resíduos ARCH e outro com mudança de regime markoviana. O artigo apresenta novas evidências empíricas que permitem responder a diversas indagações teóricas. Ele mostra que a Nairu tem crescido desde 1995 e conclui que existe uma correlação significativa e com sinal correto entre desvios da taxa de desemprego em relação à Nairu e à taxa de inflação. Conclui-se também que as estimativas da Nairu são muito pouco úteis na condução da política monetária já que os seus intervalos de confiança são demasiadamente amplos.

Pages: 23 pages
Date: 2015-01
New Economics Papers: this item is included in nep-mac
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