In this paper, we develop a bivariate unobserved components model for inflation and unemployment. The unobserved components are trend inflation and the non-accelerating inflation rate of unemployment (NAIRU). Our model also incorporates a time-varying Phillips curve and time-varying inflation persistence. What sets this paper apart from the existing literature is that we do not use unbounded ra...

Due to empirical failures, researchers recently have suggested that the inflationunemployment relationship associated with the natural rate of unemployment (NAIRU) should be characterized by more complex dynamics and/or highly nonlinear, switching regimes associated with contractions and expansions. This paper investigates empirically both the appropriate specification of the dynamics of the NA...

The search theory approach to understanding unemployment flourished during the 1980s and 1990s. It has provided economists with a rich set of models for analyzing unemployment and labor market issues more generally. Unfortunately, while economists have found modern search theory to be an invaluable tool, the insights provided by this approach remain largely unfamiliar to noneconomists. This rev...

The search theory approach to understanding unemployment flourished during the 1980s and 1990s. It has provided economists with a rich set of models for analyzing unemployment and labor market issues more generally. Unfortunately, while economists have found modern search theory to be an invaluable tool, the insights provided by this approach remain largely unfamiliar to noneconomists. This rev...

We develop a parsimonious bivariate model of inflation and unemployment that allows for persistent variation in trend inflation and the NAIRU. The model, which consists of five unobserved components (including the trends) with stochastic volatility, implies a time-varying VAR for changes in the rates of inflation and unemployment. The implied backwards-looking Phillips curve has a time-varying ...

This paper provides new estimates of a time–varying NAIRU for Germany taking account of the structural break caused by German unification using two alternative estimators, the Kalman Filter and the partially linear model. Estimating a standard Phillips curve, the sum of coefficients associated with expected inflation is far below unity, whatever measure of expected inflation rates is employed. ...

The NAIRU is the rate of unemployment consistent with stable inflation... An important challenge in setting economic policy is to identify the rate of capacity utilisation that is sustainable, in the sense that it is associated with reasonably stable inflation. There are different ways of measuring capacity utilisation. Looking at perhaps the most common measure, unemployment, this idea of sust...

in this research, the attempt was made to test the existence of the natural rate hypothesis in iran, by using a johansson cointegration test. the results do not reveal any long run relationship between inflation and unemployment in iran for 1340-1386 periods. because of the time varying nature of nairu, the hp filter was applied to estimate the time series of nairu. comparing the nairu time ser...

In this paper, we construct the uniform confidence band (UCB) of a time-varying trend in a partially linear model. A two-stage local linear regression is proposed to estimate the time-varying trend. Based on this estimate, we develop an invariance principle to construct the UCB of the trend function. The proposed methodology is used to estimate the Non-Accelerating Inflation Rate of Unemploymen...