Estimating a New Zealand NAIRU

Kam Leong Szeto and Melody Guy ()
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Melody Guy: New Zealand Treasury

No 04/10, Treasury Working Paper Series from New Zealand Treasury

Abstract: 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.

Keywords: NAIRU; Kalman filter; Unemployment; Phillips Curve; New Zealand (search for similar items in EconPapers)
JEL-codes: E24 E31 C13 C22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2004-09
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Persistent link: http://EconPapers.repec.org/RePEc:nzt:nztwps:04/10

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