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Frontiers of Economics in China

Front Econ Chin    2011, Vol. 6 Issue (1) : 76-91     DOI: 10.1007/s11459-011-0123-7
research-article |
Measuring the NAIRU — A Structural VAR Approach
Hongmei Zhao1(), Vincent Hogan2()
1. Institute of Econometrics and Statistics, School of Economics, Nankai University, Tianjin 300071, China; 2. School of Economics, University College Dublin, Dublin 4, Ireland
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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.

Keywords NAIRU      inflation      unemployment      VAR     
Corresponding Authors: Hongmei Zhao,Email:hongmeizhao@nankai.edu.cn; Vincent Hogan,Email:vincent.hogan@ucd.ie   
Issue Date: 05 March 2011
 Cite this article:   
Hongmei Zhao,Vincent Hogan. Measuring the NAIRU — A Structural VAR Approach[J]. Front Econ Chin, 2011, 6(1): 76-91.
 URL:  
http://journal.hep.com.cn/fec/EN/10.1007/s11459-011-0123-7
http://journal.hep.com.cn/fec/EN/Y2011/V6/I1/76
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