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I agree with your results. Gaps are still negative and there is slack in our economies. It is in the same spirit of the ECB w.p. ecb.europa.eu/pub/pdf/scpwps… that estimates “deviations of output from its trend that are consistent with the behavior of inflation” giving larger gaps 1/n
However, estimated NAIRUs (from Phillips curves) are not good proxies of structural (or “natural”) unemployment. Mishkin et al (2000) nber.org/papers/w6518.p… already warned that estimated NAIRU using Phillips curves have a short term cyclical component 2/n
Therefore they stated that the view that “..monetary authorities should try to move the economy towards the NAIRU, … is both incorrect and misguided”. The EU Commission E.P. n. 445 estimated directly from structural labour market variables, levels of structural unemployment 3/n
... below official NAWRUs values. I disclosed in 2018 ecb.europa.eu/press/key/date… ECB work, updating the EC 2012 paper, showing that to approximate official NAIRUs, macro cyclical variables had to be added which in the end explained the bulk of NAWRU variations in EU countries 4/n
The Commission in a paper (E.P. 552) used a concept of Structural Unemployment Rate (SUR) calculated directly from structural variables to substitute the NAWRU in the calculation of the structural budget deficit with interesting less pro-cyclical results. 5/n
A subsequent Commission D.P.n. 069 integrated the concept of SUR as a sort of anchor in the estimation of NAWRUs, that therefore result less pro- cyclical and less sensitive to data corrections. The official use of the approach for policy decision would imply a progress. 6/n
My conclusion was that we should abandon NAIRUs or NAWRUs estimated just using Philips curves to calculate policy relevant indicators.Hysteresis effects also raise fatal doubts about the idea of a stable, usable, structural (or”natural”) rate.7/n
Some argue that the natural rate of unemployment is time varying. But as @farmerrf said, there is no theory to explain how it varies: “A theory like this, which cannot be falsified by any set of observations, is closer to religion than science.” (NBER 19267) 8/n
Solow once quipped “a natural rate that wanders permanently is not natural, is epiphenomenal”. The concept of structural deficit was introduced to make the SGP less procyclical but is not working well. All proposal to reform the Stability Pact, correctly eliminate its use 9/9
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