Description

The purpose of this paper is to find a set of estimates for the non-accelerating-inflation rate of unemployment (NAIRU) for Chile. Measuring the NAIRU permits to build the unemployment gap, which provides a complementary measure of aggregate demand and of the output gap. It is generally used by central banks as part of the set of indicators with which they project inflation and make policy decisions. Initially, an estimate is obtained from a purely statistical method (unknown components). Then calculations of both constant and variable NAIRU are made on the basis of Phillips curve equations. A final measure of NAIRU is obtained, based on an estimated autoregressive vector, identified with long-run restrictions. The various estimations yield similar results and indicate that the most likely point estimate of the current NAIRU is between 7.6% and 8.1%, with a 95% confidence interval that goes from 6.4% to 9.3%. This wide interval gives an idea of the high degree of uncertainty regarding its point estimation.