Structural and reduced approaches of the equilibrium rate of unemployment, a comparison between France and the United States

Eric Heyer (1) , Frédéric Reynés , Henri Sterdyniak (1)

1 OFCE - Observatoire français des conjonctures économiques (Sciences Po)

This paper confronts, theoretically and empirically, two estimation methods for the Equilibrium Rate of Unemployment (ERU), which can be derived from a WS/PS model or from a wage Phillips curve. It shows how the TV-NAIRU reduced approach can be theoretically coherent with the structural approach even though their empirical diagnoses differ appreciably in the French case. It considerably improves the econometric and explanatory properties of the French TV-NAIRU model by identifying some of its determinants (namely, inflation, labour productivity and real interest rates).

Domaines: Economies et finances

Eric Heyer, Frédéric Reynés, Henri Sterdyniak. Structural and reduced approaches of the equilibrium rate of unemployment, a comparison between France and the United States. Economic Modelling, 2007, 24 (1), pp.42 - 65. ⟨10.1016/j.econmod.2006.06.005⟩. ⟨hal-03415930⟩