Standard estimates of the NAIRU or natural rate of unemployment are subject to considerable uncertainty. We show in this paper that using multiple indicators to extract an estimated NAIRU cuts in half uncertainty as measured by variance and gives a 33% reduction in the confidence band. The inclusion of an Okun's Law relation is particularly valuable. The essential notion is the existence of a common cyclical force driving the macroeconomic variables. Model comparisons based on the use of Bayes factors favor the idea of a common cyclical component.

We estimate a multivariate ARFIMA model to illustrate a cointegration testing methodology based on joint estimates of the fractional orders of integration of a cointegrating vector and its parent series. Previous cointegration tests relied on a two-step testing procedure and maintained the assumption in the second step that the parent series were known to have a unit root. In our empirical example of fractional cointegration, we illustrate how uncertainty regarding the order of integration of the parent series can be even more important than uncertainty regarding the order of integration of the cointegrating vector when testing for cointegration.