Estimation of the time-varying Nairu for three Eu countries and policy implications

Yu Hsing

Economia Internazionale / International Economics, 2007, vol. 60, issue 3, 333-342

Abstract: Extending Ball and Mankiw (2002) and applying the Hodrick-Prescott filter (1997), this paper estimates the time-varying NAIRU for France, Germany, and Italy. Estimated slopes vary from -0.404 for France to -0.647 for Italy. NAIRUs for France and Germany have been on the rise in recent years whereas NAIRUs for Italy with the smoothing parameter of 100 have declined in recent years. In 2005, Germany had the highest NAIRU whereas Italy had the lowest NAIRU. Because actual unemployment rates in France and Italy were lower than estimated NAIRUs and because the actual unemployment rate in Germany was higher than the estimated NAIRU, different macroeconomic policies may need to be pursued to deal with different economic conditions.

Keywords: Phillips curve; time-varying NAIRU; Hodrick-Prescott filter (search for similar items in EconPapers)
JEL-codes: E31 (search for similar items in EconPapers)
Date: 2007
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