This paper investigates the impact of inflation in different states of unemployment: evidence with the Phillips curve in South Africa. The contribution of this paper is to examine the impact of inflation on different states of unemployment in South Africa. The Paper employs Markov-switching...

In this study, we apply the Kalman filter to estimate the set of reduced-form Phillips curves for different types of inflation in Ukraine. Based on the estimated models, we derive a number of series of non-accelerating inflation rate of unemployment (NAIRU) that provide information about the...

This paper seeks to understand the behavior of Greenspan's Federal Reserve in the late 1990s. Some authors suggest that the Fed followed a simple 'Taylor rule,' while others argue that it deviated from such a rule because it recognized that the 'New Economy' permitted an easing of policy. We...

This paper studies the dynamics of unemployment (u) and its natural rate (u*), with u* measured by real-time estimates for 29 countries from the OECD. We find strong evidence of hysteresis: an innovation in u causes u* to change in the same direction, and therefore has permanent effects. For our...

This paper provides an institutional-analytical account of changes in the structure of the US Phillips curve (PC) during the post-war period. It does so by restoring conflict and power to the forefront of macro theory and, in particular, the wage- and price-setting behaviour of workers and...

This paper studies the dynamics of unemployment (u) and its natural rate (u*), with u* measured by real-time estimates for 29 countries from the OECD. We find strong evidence of hysteresis: an innovation in u causes u* to change in the same direction, and therefore has permanent effects. For our...

The Non-Accelerating Inflation Rate of Unemployment (NAIRU) is a variable of interest to policy makers as it provides an estimate of the degree of labour market slack in the economy. However, the NAIRU is unobservable, and must be estimated using statistical models. This is most commonly...

Electoral support for social democracy in Western Europe is in free fall. The implosion of social democracy is largely self- inflicted, because 'Third Way' social democracy alienated its traditional supporters by (a) a deliberate move to the non- reformist, status-quo oriented macroeconomics of...

The Phillips curve was init-ally formulated as a relationship between the rate of change and unemployment, yet what matters for stabilization policy is the rate of inflation, not the rate of wage change. This paper provides new estimates of Phillips curves for both prices and wages extending...

In this paper, a theory of the natural or equilibrium rate of unemployment is built around a theory of the duration of employment. Evidence is presented that most unemployed workers became unemployed because their previous jobs came to an end; only a minority are on temporary layoff or have just...

This paper estimates the NAIRU (standing for the Non-Accelerating Inflation Rate of Unemployment) as a parameter that varies over time. The NAIRU is the unemployment rate that is consistent with a constant rate of inflation. Its value is determined in an econometric model in which the inflation...

This paper investigates the precision of conventional and unconventional estimates of the natural rate of unemployment (the 'NAIRU'). The main finding is that the NAIRU is imprecisely estimated: a typical 95% confidence interval for the NAIRU in 1990 is 5.1% to 7.7%. This imprecision obtains...

By international standards, unemployment in Sweden remained remarkably low throughout the 1970s and the 1980s. In the early 1990s, however, the unemployment rate skyrocketed and hit double-digit levels. Unemployment remained high for several years but exhibited a marked fall from 1997 onwards....

We study the low frequency comovements in unemployment, inflation and the federal funds rate in the U.S. From 1970 through 1979 all three series trended up together; after 1979 they all trended down. The conventional explanation for the buildup of inflation in the 1970's is that the Fed reacted...

This paper addresses the issue of measuring the NAIRU for the euro area and assessing the robustness and precision of the obtained estimates. The empirical framework adopted is based on systems combining an Okun-type relationship between cyclical unemployment and the output gap with a Phillips...

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...

This paper provides a critique of the "unemployment invariance hypothesis," according to which the behavior of the labor market ensures that the long-run unemployment rate is independent of the size of the capital stock, productivity, and the labor force. Using Solow growth and endogenous growth...

This paper examines the movements in EU unemployment from two perspectives: (a) the NRU/NAIRU perspective, in which unemployment movements are attributed largely to changes in the long-run equilibrium unemployment rate and (b) the chain-reaction perspective, in which unemployment movements are...

We show in a union-bargaining model that a decrease in the unemployment benefit level increases not only equilibrium employment, but also nominal wage flexibility, and thus reduces employment variations in the case of nominal shocks. Long-term wage contracts lead to higher expected real wages...

The conventional wisdom that inflation and unemployment are unrelated in the long-run implies the compartmentalisation of macroeconomics. While one branch of the literature models inflation dynamics and estimates the unemployment rate compatible with inflation stability, another one determines...

Using stochastic simulations and stability analysis, the paper compares how different monetary rules perform in a moderately nonlinear model with a time-varying nonaccelerating-inflation-rate-of-unemployment (NAIRU). Rules that perform well in linear models but implicitly embody backward-looking...

Stochastic simulations are employed to compare performances of monetary policy rules in linear and nonlinear variants of a small macro model with NAIRU uncertainty under different assumptions about the way inflation expectations are formed. Cases in which policy credibility is ignored or treated...

Previous studies have interpreted the rise and fall of U.S. inflation after World War II in terms of the Fed's changing views about the natural rate hypothesis but have left an important question unanswered. Why was the Fed so slow to implement the low-inflation policy recommended by a natural...

This paper studies the dynamics of unemployment (u) and its natural rate (u*), with u* measured by real-time estimates for 29 countries from the OECD. We find strong evidence of hysteresis: an innovation in u causes u* to change in the same direction, and therefore has permanent effects. For our...

This paper discusses the NAIRU -- the non-accelerating inflation rate of unemployment. It first considers the role of the NAIRU concept in business cycle theory, arguing that this concept is implicit in any model in which monetary policy influences both inflation and unemployment. The exact...

Over the past three decades, a large amount of research has attempted to identify the determinants of the natural rate of unemployment. It is this body of work we assess in this paper. We reach two main conclusions. First, there has been considerable theoretical progress over the past 30 years....

Adjustment Dynamics and the Natural Rate: An Account of UK Unemployment. This paper challenges what is the standard account of UK unemployment, namely that the major swings in unemployment over the past 25 years are due predominantly to movements in the underlying empirical "natural rate of...

We jointly estimate the natural rate of interest, the natural rate of unemployment, expected inflation, and potential output for the Euro area, the United States, Sweden, Australia, and the United Kingdom. Particular attention is paid to time-variation in (i) the data-generation process for...

We examine the performance and robustness properties of monetary policy rules in an estimated macroeconomic model in which the economy undergoes structural change and where private agents and the central bank possess imperfect knowledge about the true structure of the economy. Policymakers...

This paper provides an explanation for the run-up of U.S. inflation in the 1960s and 1970s and the sharp disinflation in the early 1980s, which standard macroeconomic models have difficulties in addressing. I present a model in which rational policymakers learn about the behavior of the economy...

This paper explores a model of wage adjustment based on the assumption that information disseminates slowly throughout the population of wage setters. This informational frictional yields interesting and plausible dynamics for employment and inflation in response to exogenous movements in...

This paper studies the role of long-term unemployment in the determination of prices and wages. Labor market theories such as insider-outsider models predict that this type of unemployed are less relevant in the wage formation process than the newly unemployed. This paper looks for evidence of...

This paper explores the role that the imperfect knowledge of the structure of the economy plays in the uncertainty surrounding the effects of rule-based monetary policy on unemployment dynamics in the euro area and the US. We employ a Bayesian model averaging procedure on a wide range of models...

Problems of defining and measuring unemployemnt in the contemporary American economy are examined here using data from the official employment survey. The paper finds that only a minority of the unemployed conform to the conventional picture of a worker who has lost one job and is looking f or...

In this paper we rethink the NAIRU concept and examine whether it might have a useful role in monetary policy. We argue that it can, but success depends critically on defining NAIRU as a short-run concept and distinguishing it from a long-run concept like the natural rate of unemployment. We...

The most important conclusion of this paper is that the growth rate of the money supply influences the U.S. inflation rate more strongly and promptly than in most previous studies, because the flexible exchange rate system has introduced an additional channel of monetary impact, over and above...

U.S. macroeconomic evidence shows a negative relation between the rate of change of wages and unemployment. In contrast, most theories of wage determination imply a negative relation between the level of wages and unemployment. In this paper, we ask whether one can reconcile the empirical...

We develop an estimated model of the U.S. economy in which agents form expectations by continually updating their beliefs regarding the behavior of the economy and monetary policy. We explore the effects of policymakers' misperceptions of the natural rate of unemployment during the late 1960s...

This paper has two aims. First, it provides simple theoretical models that highlight two channels whereby monetary shocks have permanent real effects and the interactions between these channels. Second, it presents an empirical dynamic model, covering a panel of EU countries, and derives the...

As a bottom-up approach, a Job Guarantee policy can tackle the issue of unemployment on the macroeconomic, socioeconomic, and individual level in a unique way and promote the social inclusion of the unemployed. This paper aims at analysing the potential obstacles - namely inflationary pressure...

The non-accelerating inflation rate of unemployment (NAIRU) is not directly observable and the presence of informal workers imposes an additional challenge in its estimation. Countries with large informal sectors, traditional measures might not depict labor slack properly, as it has the wage...