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Estimating a New Zealand NAIRU - WP 04/10

Publication Details

  • Estimating a New Zealand NAIRU
  • Published: Sep 2004
  • Status: Current
  • Authors: Guy, Melody; Szeto, Kam Leong
  • JEL Classification: C13; C22; E24; E31
  • Hard copy: Available in HTML and PDF formats only.

Estimating a New Zealand NAIRU

New Zealand Treasury Working Paper 04/10

Published: September 2004

Authors: Kam Leong Szeto and Melody Guy


This paper estimates the non-increasing inflation rate of unemployment or NAIRU for New Zealand. A NAIRU that varies over time has important implications in considering inflationary pressures. This paper estimates the time-varying NAIRU using a Kalman filter on a reduced form approach and extends previous studies in several ways. Using different model specifications and dependent variables suggests a band of NAIRU estimates of between four and five percent (with further error bands around that). The results of this paper indicate that the NAIRU is a relevant concept and the unemployment gap should be one of the factors considered when assessing inflationary pressure.

Table of Contents

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Table of Contents

List of Tables

List of Figures

1 Introduction

2 Overview of the NAIRU

3 Estimation issues

4 Model specification and results

5 Conclusion


twp04-10.pdf (219 KB) pp. 23

List of Tables

List of Figures


The authors would like to thank Mark Blackmore, Paul Gardiner, Özer Karagedikli, and Richard Downing for helpful suggestions at the initial stages of this research project. We would also like to thank Thomas Laubach and David Rae for providing us with files and data used in their studies. We are grateful to Özer Karagedikli, Paul Gardiner, Richard Downing, Khoon Goh, Angela Huang, Brendon Riches, Tony Booth, Peter Mawson, Brian Silverstone, Bob Buckle and Veronica Jacobsen for useful comments on drafts of this paper.


The views, opinions, findings, and conclusions or recommendations expressed in this Working Paper are strictly those of the author(s). They do not necessarily reflect the views of the New Zealand Treasury. The New Zealand Treasury takes no responsibility for any errors or omissions in, or for the correctness of, the information contained in this Working Paper. The paper is presented not as policy, but to inform and stimulate wider debate.

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