Identification and dimension of the NAIRU

In this paper, we have re-examined the identification of the NAIRU and pres ented a well-defined reduced form for analysing the equilibrium unemploymen t rate, using a cointegrated VAR model. We have stated that the NAIRU estim ates using the conventional reduced form (or Phillips curve) models are mis leading since the natural rate of unemployment cannot be considered as a fi xed point calling for the ceteris paribus assumption for all the data invol ved. This implies that the NAIRU estimates are unable to provide valuable i nformation on the labour market status. (C) 2001 Elsevier Science B.V. All rights reserved.