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Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.
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Reassessing the NAIRUs after the Crisis
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- Stéphanie Guichard, Elena Rusticelli1
- Author Affiliations
- 1: OECD, France
- 19 Dec 2011
- Bibliographic information
The financial crisis has resulted in a substantial increase in unemployment in the OECD. This paper shows that this increase has reversed the reduction in structural unemployment which has been estimated to have occurred in most OECD countries since the late 1990s. Structural unemployment is defined as a time-varying NAIRU derived from the information contained in a reduced Phillips curve equation (linking inflation to the unemployment gap) by means of a Kalman filter. The overall limited revisions in historical NAIRU estimated in 2008 after such a large labour market shock support the robustness of the OECD approach. This approach is therefore extended to almost all OECD countries. Alternative specifications of the Phillips curve are proposed for some specific groups of countries.
- structural unemployment, NAIRU, unemployment, Phillips curves
- JEL Classification:
- C32: Mathematical and Quantitative Methods / Multiple or Simultaneous Equation Models; Multiple Variables / Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
- E24: Macroeconomics and Monetary Economics / Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy / Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
- E31: Macroeconomics and Monetary Economics / Prices, Business Fluctuations, and Cycles / Price Level; Inflation; Deflation
- J3: Labor and Demographic Economics / Wages, Compensation, and Labor Costs
- J6: Labor and Demographic Economics / Mobility, Unemployment, Vacancies, and Immigrant Workers