Alternative Measures of the NAIRU in the Euro Area: Estimates and Assessment

By S. Fabiani, R. Mestre. Social Science Research Network, 2000

135 citations recorded by the source corpus.

The paper focuses on the measurement of the NAIRU (Non-Accelerating-Inflation-Rate-of-Unemployment) for the euro area and assesses the usefulness of different methodologies developed in the literature to estimate this unobservable variable at the aggregate level. After reviewing the theoretical framework underlying the most common estimation approaches, it presents several estimates of the area-wide NAIRU based on a number of direct (or statistical) techniques. The latter range from simple univariate filtering approaches to more complex multivariate methods based on Phillips curve relationships. The different estimates of the aggregate NAIRU appear to be consistent and robust with respect to alternative specifications, methodologies and choice of the inflation indicator. They also show significant inflation forecasting ability and are able to produce sensible measures of the output gap, therefore providing some ground to argue that unemployment and the unemployment gap may be a useful variable to analyse short-term economic developments at the euro area level. JEL Classification: E24, E31, C14, C22

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/4c0b957621a568863bbd91a16f23ade4ce8a1aec

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In Economics and Econometrics

1. S. Fabiani
2. R. Mestre
3. Jean-Stéphane Mésonnier
4. Jean-Paul Renne

Citations in the corpus

• A system approach for measuring the euro area NAIRU (2004, methodology): “1 For a more detailed review of the empirical literature on the issue of the estimation of the NAIRU, see Fabiani and Mestre (2000).”