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Empirical Estimates of the NAIRU
Author(s) -
Madsen Jakob B.
Publication year - 2005
Publication title -
labour
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.403
H-Index - 34
eISSN - 1467-9914
pISSN - 1121-7081
DOI - 10.1111/j.1467-9914.2005.00307.x
Subject(s) - nairu , economics , unemployment , phillips curve , econometrics , inflation (cosmology) , constant (computer programming) , term (time) , inflation rate , keynesian economics , macroeconomics , monetary policy , physics , quantum mechanics , theoretical physics , computer science , programming language
. Empirical studies have found that the non‐accelerating inflation rate of unemployment (NAIRU) has been fluctuating in OECD countries around a constant mean of several percentage points over the past decades. This mean is calculated from the constant terms carried over from the wage and price growth equations. In this paper it is shown that a high proportion of the constant term is a statistical artefact and suggests a new method which yields approximately unbiased estimates of the time‐invariant NAIRU. Using data for OECD countries it is shown that the constant‐term correction lowers the unadjusted time‐invariant NAIRU by approximately half.