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:: Volume 1, Issue 3 (6-2011) ::
2011, 1(3): 135-166 Back to browse issues page
Estimate NAIRU with Kalman filter approach and HP filter
Hossein Abasinejad
Abstract:   (25322 Views)
NAIRU stands for the Non Accelerating Inflation Rate of Unemployment. There are, however, two issues that fail to command consensus among economists, which we address in this essay. The first issue is whether the concept of the NAIRU is a useful piece of business cycle theory and monetary policy analysis. The second issue is why the NAIRU changes over time. The other issue describes the effect of expansionary monetary policy in the Iran’s economy to be attentive to Non Accelerating Inflation Rate of Unemployment. The results, by using a Johansson Cointegration test do not reveal any long run relationship between inflation and unemployment in Iran for 1961-2010 periods. Because of the time varying nature of NAIRU, the Kalman filter and HP filter was applied to estimate the time series of NAIRU. The NAIRU in the period under consideration estimated at 12.13 percent. Comparing the NAIRU time series and the actual unemployment rates reveal that, in the period under consideration 2006 - 2010 the NAIRU was above actual unemployment rate. Hence, in this situation, enforcement of expansionary policy in order to more decrease in long run unemployment rate will accelerate the inflation without ceasing any decrease in unemployment. According with respect to extracted NAIRU, we can claim that enforcement of monetary policy for dealing of unemployment doesn’t has any effect on increasing or decreasing of inflation and in a point that NAIRU is bigger than real unemployment rate, enforcement monetary policy aimed to decrease unemployment is neutral and leads to increase in inflation rate, Therefore, for catching up to Nairue position, sticking to a monetary rule is required.
Keywords: NAIRU, Expectations Inflation, HP filter, Kalman filter
Full-Text [PDF 634 kb]   (2470 Downloads)    
Type of Study: Research | Subject: اقتصاد بین الملل
Received: 2012/01/26 | Accepted: 2014/10/8 | Published: 2014/10/8
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Abasinejad H. Estimate NAIRU with Kalman filter approach and HP filter. Economic Development Research. 2011; 1 (3) :135-166
URL: http://jrer.ir/article-1-67-en.html

Volume 1, Issue 3 (6-2011) Back to browse issues page
فصلنامه تحقیقات توسعه اقتصادی Journal of Economic Development  Research
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