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Concept, Measurement and Policy Implications of the NAIRU: Perspective from Belgium

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  • Joost Verlinden

Abstract

The use of the NAIRU-concept is not very widespread in Belgium. This may be partly due to an observed unemployment rate that is probably significantly higher than the NAIRU for most of the past two decades. Government policy to halve the administrative notion of unemployment by the beginning of the next century has therefore little regard for the NAIRU level. A second reason for the low popularity of the NAIRU resides in the fact that the measurement issues are seen as enormous. Confidence intervals for NAIRU estimates are notably high. From partial information on the last economic cycle in 1987-94, the deduction is nevertheless that the NAIRU would be in the 7-8 per cent range.Instead of finding exact estimates for the NAIRU, the paper looks into the wage formation process in Belgium in the long and short run. Although total factor productivity is the main long-term influence of real wages, in the short term labour market pressure is clearly the main determining factor. It is ... L’utilisation du concept du NAIRU n’est pas très répandue en Belgique. Ceci résulte sans doute en partie du fait que le taux de chômage observé a été la plupart du temps significativement plus élevé que le NAIRU au cours des 20 dernières années. La politique économique du gouvernement qui vise à réduire de moitié la notion administrative du chômage avant le début du siècle prochain ne s’intéresse donc que peu au niveau du NAIRU. Une seconde raison du faible intérêt suscité par le NAIRU réside dans le fait que les problèmes de mesure de cet indicateur apparaissent considérables. Les intervalles de confiance des estimations du NAIRU sont particulièrement larges. Les informations partielles que l’on peut extraire du dernier cycle économique 1987-94 suggèrent néanmoins que le NAIRU se situerait dans une fourchette de -8 pour cent.Plutôt que chercher à déterminer une estimation précise du NAIRU, cette étude procède à analyse du processus de formation des salaires en Belgique à court et ...

Suggested Citation

  • Joost Verlinden, 1997. "Concept, Measurement and Policy Implications of the NAIRU: Perspective from Belgium," OECD Economics Department Working Papers 184, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:184-en
    DOI: 10.1787/635467476788
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    Cited by:

    1. Alex Durand, 2005. "Le chômage structurel dans une petite économie ouverte. Application au Luxembourg," Économie et Prévision, Programme National Persée, vol. 169(3), pages 105-126.

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