Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/23971
Authors: 
Franz, Wolfgang
Year of Publication: 
2003
Series/Report no.: 
ZEW Discussion Papers 03-35
Abstract: 
This paper deals with a critical assessment and a reestimation of the "non-accelerating in ation rate of unemployment" (NAIRU) for Germany. There are quite a few obstacles to perceiving the NAIRU as an understandable and easy-to-use analytical instrument, suitable for economic policy: the possibility of a non-vertical Phillips curve (e.g. in times of low in ation), the occurrence of shocks and hysteresis effects, the (mis-)measurement of important variables such as in ation expectations, cointegration issues, and a time variability of the NAIRU and its confidence intervals. Despite many serious caveats a new attempt is made to estimate a NAIRU for Germany based on conventional Phillips curves as well as on new approaches such as using direct measures of in ationary expectations, the Kalman filter method, and the residual-based bootstrap procedure (in order to estimate confidence intervals). However, by any method, simple or complex, the NAIRU is very hard to determine and subject to considerable arbitrariness.
Subjects: 
NAIRU
unemployment
inflation
Phillips curve
natural rate
hysteresis
supply shocks
inflation expectations
Kalman filter
bootstrap
JEL: 
C22
E24
E31
Document Type: 
Working Paper

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