The Time-Varying NAIRU and its Implications for Economic Policy | Zendy

Robert J. Gordon | Zendy

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The Time-Varying NAIRU and its Implications for Economic Policy

Author(s) -

Robert J. Gordon

Publication year - 1997

Publication title -

the journal of economic perspectives

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 9.614

H-Index - 196

eISSN - 1944-7965

pISSN - 0895-3309

DOI - 10.1257/jep.11.1.11

Subject(s) - nairu , economics , inflation (cosmology) , unemployment , value (mathematics) , quarter (canadian coin) , inflation rate , labour economics , monetary economics , macroeconomics , unemployment rate , econometrics , keynesian economics , monetary policy , statistics , history , physics , mathematics , archaeology , theoretical physics

The NAIRU, the unemployment rate consistent with a constant rate of inflation, is estimated, in this paper, as a parameter allowed to vary over time. Value is determined in an econometric model where the inflation rate depends on its past values, demand and supply shocks. The NAIRU estimated for the GDP deflator varies over the past forty years within 5.4 to 6.5 percent; its estimated value for the most recent quarter (1996:Q2) is 5.6 percent. The NAIRU has declined in recent years in response to global competition, immigration, other factors weakening labor's bargaining position, and the rapidly declining prices of computers and other electronics.

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