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Prepared by Antoine Magnier.
ln this chapter, the terms “trend” and “potential” output are used interchangeably.
See Staiger et al. (1997) for a conclusions on estimates of the NAIRU.
Deviations of the unemployment rate from its trend were used rather than the unemployment rate itself as the latter appears to be a series integrated of order 1, reflecting a steady rise since the beginning of the 1980s (see Blanchard and Quah, 1989, for a discussion of this issue).
This feature is not overly surprising, however, as Coe and McDermott have shown that their approach delivers, under certain circumstances, results similar to those of the HP filter method and since the production function approach relies on smoothing some components of factor input with the HP filter.
See, for instance, Staiger, Stock and Watson (1996) for a recent study on the precision of conventional and unconventional econometric estimates of the NAIRU in the United States.
The indicator based on the Beveridge curve appears less reliable, however, since it is subject to the strong end-of-sample bias associated with the HP filter.
The cyclical fluctuations for the EU and the euro area as a whole are of a similar amplitude as in Austria. This low amplitude however reflects the aggregation of national cycles that are not perfectly synchronized.