The Estimate On The NAIRU In China On The Basis Of A Structural Vector Auto-regression (SVAR) Model

With the rapid development of economy, the developed countries and the developing countries have focused on the unemployment. As the unemployment is harm to the whole society and the unemployment. The unemployment means a waste of the human capital for the whole society, and there is no full use of human resources to create more wealth to meet the demand of producing and daily life. For the unemployment, no job is a sign of no income. The unemployment makes his life worse and decreases the family's welfare. Therefore, it is worth to have our focus and research on the unemployment.Furthermore, the rate of unemployment is an important index of macroeconomics. It is also important to make exact macroeconomics policy. In short run, there is an (?)lternate relationship between the rate and the inflation, which has vital value for controlling the inflation in macroeconomic.At the beginning of the reform and opening, there is a decline in the rate of the urban registered unemployment and reach the lowest point,1.9percent, in 1985 year. But, the rate of the urban registered unemployment is higher and higher after 1985. There are many reasons for this phenomenon, such as the reform in social enterprise, the restructure of industry, population boom. However, how much is the ratio of the natural rate of unemployment (NAIRU) in the increasing rate of unemployment, which requires us to measure the NAIRU.There are some means in the estimate of NAIRU. The traditional way regards NAIRU as a constant and use OLS to measure it. Except this way, three means often are used. The first one is the labor market structure model. This way measure NAIRU by combining the wage-inflation and the price-inflation equation. Another one is the pure statistical model. The rate of unemployment is divided into the cycle and the trend. The trend can be regard as NAIRU. The third is the simple model. The estimate of NAIRU is come into by using the state space model of "Philips curve" and HPMV filtering or KALMAN filtering technicalities. Although Liu Shu Cheng(1997) has researched the existence of the Philips curve in China, there are enough proof for its existence. As the means of the estimate of NAIRU, stated on the above, are on the basis of Philips curve. We use another way, SVAR discussed by Blanchard (1989), to measure NAIRU.In the paper, the grounding and the significance of the research is stated at first. Then, the natural rate of unemployment (NAIRU) of China can be measured as the time-varying steady state of SVAR. The aggregate supply shock and the natural rate shock are the main factor for the unemployment fluctuation from SVAR, and the time-varying of NAIRU can be got from impulse response function. Then, I choose 16 variables to estimate the determinants of NAIRU on the basis of "Search-Match" model, make a careful analysis of the China's unemployment fluctuation and give some political advice. At the end of the paper, the orientation of the further research and the flaw of the paper are showed.