Measuring the UK short-run NAIRU

Nicoletta Batini and Jennifer Greenslade ()

Oxford Economic Papers, 2006, vol. 58, issue 1, 28-49

Abstract: This paper derives alternative measures of the short-run NAIRU (SRN) for the United Kingdom, the rate for unemployment at which inflation will neither increase nor decrease in the short-run. We estimate the NAIRU jointly with price equations by using the Kalman filter. Our work suggests that both structural changes in the labour market and favourable supply shocks may have had a beneficial impact on RPIX inflation over the last few years. We show that deviations of unemployment from the short-run NAIRU measures prove helpful in explaining inflation and we demonstrate their usefulness in constructing Taylor-type policy rules for the interest rate. Copyright 2006, Oxford University Press.

Date: 2006
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Working Paper: Measuring The UK Short-Run NAIRU (2003)
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