Um Conto de Três Hiatos: Desemprego, Utilização da Capacidade Instalada da Indústria e Produto

We assess the relationship between unemployment , capacity utilization and inflation in Brazil by means of disaggregated Phillips curves Our main contribution is to consider separately the dynamics of tradable and nontradable sectors, and highlight the importance of disaggregating the roles of the unemployment rate and capacity utilization to explain the dynamics of inflation. Using quarterly data for the period 1999Q2 – 2012Q4, we estimate the NAIRU, NAICU and the output gap incorporating a more comprehensive economic structure in the Kalman filter. The results suggest that the labor market and industry variables have significant impacts on inflation, ie , the unemployment gap is the relevant demand variable to explain inflation in the nontradable sector, while the capacity utilization gap is important for inflation of tradable goods. There is evidence of substantial reduction in the NAIRU in recent years, reaching about 6.3 % by the end of 2012. Moreover, our results suggest that the unemployment rate is below the NAIRU since mid-2010. The results show a dichotomy in the Brazilian economy in recent years: while the industrial sector shows poor performance and difficulties to react, the labor market is heated and generating pressures on the output gap.