Empirical Verification of the Ability of selected Methods for estimating the NAIRU locate unstable Environment on the Labour Market
Jašová, E., & Kadeřábková, B.
Abstract:
Application of One-equation model confirmed that one long-term NAIRU for the whole period did not capture the development in the labour market during unstable and transition periods (eg.the transition environment and recession period or let us say, conjuncture). Since the Break model in the monitored period separates out some time intervals, the estimated NAIRU better reflects the real situation in the labour market. Kalman filter with a higher coefficient of smoothing than is the commonly recommended value succeeded in capturing the non-stable environment in the labour market. We found these sources of instability and changes in labour market: the restructuring of the economy, change in nature of trade-off between unemployment rate and households´ consumption deflator caused by factors exogenous to the labour market or by the global financial and economic crisis. The instability of economic environment can be represented by negative values of NAIRU. The experiences with non-stable environment in past can be used, under condition of anticipated expectations environment, to estimate it at the end of the examined period. Kalman filter can indicate the time leading between labour market development in various countries and be used for short-term prediction.
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APA citation
- Jašová, E., & Kadeřábková, B. (2012). Empirical Verification of the Ability of selected Methods for estimating the NAIRU locate unstable Environment on the Labour Market. International Journal of Economic Sciences, I(2), 160–182.