Skip to main content
Article thumbnail
Location of Repository

THE NAIRU-CONCEPT: A FEW REMARKS by

By Karl Pichelmann and Andreas Ulrich Schuh

Abstract

Complete document available on OLIS in its original format Paris ABSTRACT/RESUME This note gives a brief survey of main theoretical and empirical issues with respect to the NAIRU concept. According to modern labour market literature NAIRU is defined as the rate of unemployment at which inflation stabilises in the absence of any wage-price surprises. Conventional thinking about the equilibrium unemployment rate assumes that in the long run NAIRU is determined solely by supply side factors of the labour market. We show that quite complex adjustment dynamics may arise even in simple log-linear wage-price models. Furthermore we provide a survey on a number of “hysteresis-mechanisms ” which could lead to permanent shifts of equilibrium unemployment over time, implying that an unique long run NAIRU may not even exist. In addition to theoretical issues we refer to two serious problems which might arise with empirical applications of the NAIRU concept. First various empirical studies suggest that results highly depend on model specifications. Second a considerable amount of statistical imprecision is inherent in the results obtained from empirical estimates

Year: 2009
OAI identifier: oai:CiteSeerX.psu:10.1.1.135.8234
Provided by: CiteSeerX
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • http://citeseerx.ist.psu.edu/v... (external link)
  • http://www.oecd.org/dataoecd/3... (external link)
  • Suggested articles


    To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.