Measuring the UK Short-Run NAIRU

Posted: 29 Feb 2008

See all articles by Nicoletta Batini

Nicoletta Batini

International Monetary Fund (IMF)

Jennifer V. Greenslade

Bank of England - External MPC Unit

Abstract

This paper derives alternative measures of the short-run NAIRU (SRN) for the United Kingdom, the rate for unemployment at which inflation will neither increase nor decrease in the short-run. We estimate the NAIRU jointly with price equations by using the Kalman filter. Our work suggests that both structural changes in the labour market and favourable supply shocks may have had a beneficial impact on RPIX inflation over the last few years. We show that deviations of unemployment from the short-run NAIRU measures prove helpful in explaining inflation and we demonstrate their usefulness in constructing Taylor-type policy rules for the interest rate.

JEL Classification: E24, E31, E50

Suggested Citation

Batini, Nicoletta and Greenslade, Jennifer V., Measuring the UK Short-Run NAIRU. Oxford Economic Papers, Vol. 58, No. 1, pp. 28-49, 2006. Available at SSRN: https://ssrn.com/abstract=916849

Nicoletta Batini

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Jennifer V. Greenslade (Contact Author)

Bank of England - External MPC Unit ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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