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Measuring the NAIRU ¡ª A Structural VAR Approach

Author

Listed:
  • Hongmei Zhao

    (Institute of Econometrics and Statistics, School of Economics, Nankai University, Tianjin 300071, China)

  • Vincent Hogan

    (School of Economics, University College Dublin, Dublin 4, Ireland)

Abstract

This paper calculates the NAIRU for the US in a framework that allows inflation and unemployment to be jointly endogenous. We define the NAIRU as being the component of actual unemployment that is uncorrelated with inflation in the long run. We use a structural VAR to estimate the NAIRU and core inflation simultaneously and with greater precision than most of the previous literature. Our results show that the NAIRU fell dramatically at the end of the 1990s from 6.7% before 1997 to 5.2% afterwards.

Suggested Citation

  • Hongmei Zhao & Vincent Hogan, 2011. "Measuring the NAIRU ¡ª A Structural VAR Approach," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 6(1), pages 76-91, March.
    • Handle: RePEc:fec:journl:v:6:y:2011:i:1:p:76-91
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    File URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0123-7
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    More about this item

    Keywords

    NAIRU; inflation; unemployment; VAR;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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