Measuring the US NAIRU as a step function

Hiroshi Yamada () and Gawon Yoon ()
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Hiroshi Yamada: Hiroshima University
Gawon Yoon: Kookmin University

Empirical Economics, 2016, vol. 51, issue 4, No 18, 1679-1688

Abstract: Abstract This paper reestimates the time-varying nonaccelerating inflation rate of unemployment (NAIRU) in the US. By assuming the NAIRU is a step function, not a smooth function, we show that a simple empirical model provides evidence supporting the consensus among macroeconomists that the US NAIRU was constant at about 6.0 % from the 1980s to the mid-1990s and then fell sharply below 6.0 % in the late 1990s.

Keywords: NAIRU; Step function; Change point; $$\ell _{1}$$ ℓ 1 -Norm penalized least squares (search for similar items in EconPapers)
JEL-codes: C22 E24 E31 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1007/s00181-015-1048-2

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