Capital stock and unemployment: searching for the missing link

This paper examines the proposition that capital stock relative to aggregate output has been an important variable in the determination of the Non-Accelerating Inflation Rate of Unemployment (NAIRU) over the last four decades. The authors present new empirical evidence that lends strong support to the claim that the aggregate capital-output ratio, the real price of imports, and aggregate capacity utilization were determinants of the NAIRU during the period. The same evidence also shows that technical progress and changes in long-term unemployment did not affect the NAIRU. We believe this evidence suggests that, insofar as the aggregate capital-output ratio is affected by changes in real interest rates, the stance of monetary policy is one determinant of the NAIRU.

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Year of publication:	2006
Authors:	Perez-Soba Aguilar, Ines ; Marquez de la Cruz, Elena ; Martinez-Canete, Ana Rosa ; Palacio-Vera, Alfonso
Publisher:	Annandale-on-Hudson, NY : Levy Economics Institute of Bard College
Subject:	Capital-output ratio : cointegrated VAR model \| NAIRU \| capacity utilization

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Series:	Working Paper ; 475
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	57016723X [GVK] hdl:10419/31581 [Handle]
Classification:	E22 - Capital; Investment (including Inventories); Capacity ; E24 - Employment; Unemployment; Wages ; C32 - Time-Series Models
Source:	EconStor