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    Challenges facing natural rate theory

    Bianchi, M. and Zoega, Gylfi (1997) Challenges facing natural rate theory. European Economic Review 41 (3-4), pp. 535-547. ISSN 0014-2921.

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    This paper attempts to test the natural rate hypothesis by looking at historical unemployment data for France, the UK and the US. We find that the unemployment series can be described as stationary around an infrequently changing mean. Moreover, that the speed of convergence towards mean unemployment is slower when unemployment is high and differs across the three countries: the two European countries having more persistence. We do not find any evidence that the persistence of a change in unemployment is a function of the size of the change. We conclude that the data are consistent with multiple equilibria models where large shocks bring the economy from one equilibrium to another, and also with models with a moving natural rate.


    Item Type: Article
    School: Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School
    Depositing User: Sarah Hall
    Date Deposited: 01 Dec 2020 17:49
    Last Modified: 02 Aug 2023 18:06


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