Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/24655
Authors: 
Fitzenberger, Bernd
Franz, Wolfgang
Bode, Oliver
Year of Publication: 
2007
Series/Report no.: 
ZEW Discussion Papers 07-070
Abstract: 
This paper provides new estimates of a time?varying NAIRU for Germany taking account of the structural break caused by German unification based on the Kalman Filter and on a partially linear model as two alternatives. Estimating a standard Phillips curve, the sum of coefficients associated with expected inflation is far beyond unity, whatever measure of expected inflation rates is employed. Therefore, either the NAIRU concept is not applicable to Germany or, as it is our suggestion, one estimates the unemployment rate that is compatible with a tolerable inflation rate of say 2 percent following roughly the inflation target put forward by the European Central Bank. The estimates presented in this paper suggest that the NAIRU compatible with 2 percent inflation in Germany is currently around 7 percent if the definition of unemployment follows the concept of the ILO. In contrast to the consensus in the literature, our estimates suggest furthermore that the NAIRU in Germany has not increased since the early 1990?s.
Subjects: 
NAIRU
unemployment
inflation
Phillips curve
Okun?s Law
German unification
Kalman Filter
partially linear model
JEL: 
C22
E31
E24
Document Type: 
Working Paper

Files in This Item:
File
Size
593.3 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.