Abstract
This paper proposes an alternative measure for the slack of the aggregate labor market. The natural rate of hours holds valuable information about the state of the labor market that is not reflected by conventional measures, such as the equilibrium rate of unemployment, because it takes the intensive margin into account and is robust to variations in labor force participation. We set up and estimate a multivariate unobserved-components model using information on GDP, inflation, and hours worked, and apply it to the United States and Germany. The estimated hours gap outperforms conventional unemployment gap measures in a Taylor rule by formal model comparison.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
