Empirical Estimates of the NAIRU

31 Pages Posted: 4 Oct 2005

See all articles by Jakob B. Madsen

Jakob B. Madsen

University of Copenhagen - Department of Economics

Abstract

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.

Suggested Citation

Madsen, Jakob Bruechner, Empirical Estimates of the NAIRU. Labour, Vol. 19, No. 3, pp. 563-593, September 2005, Available at SSRN: https://ssrn.com/abstract=795627

Jakob Bruechner Madsen (Contact Author)

University of Copenhagen - Department of Economics ( email )

Ă˜ster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

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