Inflation targeting requires inflation forecasts, yet most models in the literature are either theoretical or calibrated. The motivation for this paper is therefore threefold: We seek to test and implement an econometric model forforecasting inflation in Norway–one economy recently opting for...

Estimates of the NAIRU are usually derived either from a Phillips curve or from a wage curve. This paper investigates the correspondence between the operational NAIRU-concepts and the steady state of a dynamic wage-price model. We derive the parameter restrictions that secure that...

Inflation targeting makes the Central Bank's conditional inflation forecast the operational target for monetary policy. Successful inflation targeting requires knowing the transmission mechanisms to inflation from shocks as well as instruments. The econometric implications are that the...

Empirical models of Australian wages and prices are either single equation, equilibrium correction models or structural VAR models. Both theory and empirical evidence from other countries, however, suggests that wages and prices are jointly determined. Consequently, this paper estimates a...

The unemployment rate in Australia is modelled as an assymmetric and non-linear function of aggregate demand, productivity, real wages and unemployment benefits. Negative changes in aggregate demand cause the unemployment rate to rise rapidly, while real wage rigidity contributes its to slow...

Linear dynamic equilibrium correction mechanisms are shown to follow from the discretisation of continuous processes with steady-state solutions.

Models of the aggregate unemployment rate have traditionally been estimated from structural models of the labour market or in a linear single-equation framework. However, theory as well as evidence suggest that the unemployment rate is asymmetric and should be modelled in a non-linear framework....

Equilibrium correction models of the price level are often used to model inflation. Such models assume that the long-run markup of prices over costs is fixed, but this may not be true for the Euro area economy, which has undergone major structural reforms over the last 25 years. We allow for...

The paper describes the influx of mathematical statistics in economics. It focuses on an approach to macroeconometric modelling which is based on fundamental statistical concepts like the joint distribution function of all observable variables for the whole sample period. The methodology relies...

Empirical models of inflation often incorporate equilibrium correction effects based upon levels of prices and input costs. Such models assume that the steady-state price-cost markup is constant, but recent research suggests that this may not be true for the Euro area economy, which has...