TY  - JOUR
AU  - Staiger,Douglas
AU  - Stock,James H.
AU  - Watson,Mark W.
TI  - How Precise are Estimates of the Natural Rate of Unemployment?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5477
PY  - 1996
Y2  - March 1996
UR  - http://www.nber.org/papers/w5477
L1  - http://www.nber.org/papers/w5477.pdf
N1  - Author contact info:
Douglas O. Staiger
Dartmouth College
Department of Economics
HB6106, 301 Rockefeller Hall
Hanover, NH 03755-3514
Tel: 603/646-2979
Fax: 603/646-2122
E-Mail: douglas.staiger@dartmouth.edu

James H. Stock
Department of Economics
Harvard University
Littauer Center M27
Cambridge, MA 02138
Tel: 617/496-0502
Fax: 617/495-7730
E-Mail: James_Stock@harvard.edu

Mark W. Watson
Department of Economics
Princeton University
Princeton, NJ 08544-1013
Tel: 609/258-4811
Fax: 609/258-5533
E-Mail: mwatson@princeton.edu
M1  - published as Douglas O. Staiger, James H. Stock, Mark W. Watson. "How Precise Are Estimates of the Natural Rate of Unemployment?," in Christina D. Romer and David H. Romer, Editors, "Reducing Inflation: Motivation and Strategy" University of Chicago Press (1997)

M2  - featured in NBER digest on 1996-06-01
AB  - This paper investigates the precision of conventional and unconventional estimates of the natural rate of unemployment (the 'NAIRU').  The main finding is that the NAIRU is imprecisely estimated: a typical 95% confidence interval for the NAIRU in 1990 is 5.1% to 7.7%.  This imprecision obtains whether the natural rate is modeled as a constant, as a slowly changing function of time, as an unobserved random walk, or as a function of various labor market fundamentals; it obtains using other series for unemployment and inflation, including additional supply shift variables in the Phillips curve, using monthly or quarterly data, and using various measures for expected inflation.  This imprecision suggests caution in using the NAIRU to guide monetary policy.
ER  -