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Sources of German Unemployment: Evidence from a Structural VAR Model

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  • Tobias Linzert

    () (Universität Frankfurt am Main)

Abstract

This paper analyzes the dynamic effects of different macroeconomic shocks on unemployment in Germany. In a first step, a cointegration analysis of productivity, prices, real wages, employment, and the unemployment rate reveals two long run relationships, interpreted as a labor demand and a wage setting scheme. Secondly, a structural VAR model is identified using the restrictions suggested by a small macroeconomic model. The impulse response analysis and the forecast error variance decomposition display that price, demand, and labor supply shocks affect unemployment significantly in the short/medium run. Interestingly, however, wage and technology shocks do not seem to play a dominant role.

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Bibliographic Info

Article provided by Justus-Liebig University Giessen, Department of Statistics and Economics in its journal Journal of Economics and Statistics.

Volume (Year): 224 (2004)
Issue (Month): 3 (May)
Pages: 317-336

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Handle: RePEc:jns:jbstat:v:224:y:2004:i:3:p:317-336

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Keywords: Unemployment; Structural VAR; cointegration;

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References

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  1. C Bean, 1992. "European Unemployment: A Survey," CEP Discussion Papers dp0071, Centre for Economic Performance, LSE.
  2. Juan J. Dolado & Juan F. Jimeno, . "The causes of Spanish unemployment: A structural VAR apporach," Working Papers 96-19, FEDEA.
  3. Hassler, Uwe & Wolters, Jurgen, 1995. "Long Memory in Inflation Rates: International Evidence," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 37-45, January.
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  8. Dennis W. Carlton, 1987. "The Rigidity of Prices," NBER Working Papers 1813, National Bureau of Economic Research, Inc.
  9. repec:cup:macdyn:v:2:y:1998:i:4:p:472-91 is not listed on IDEAS
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  11. Manning, Alan, 1993. "Wage Bargaining and the Phillips Curve: The Identification and Specification of Aggregate Wage Equations," Economic Journal, Royal Economic Society, vol. 103(416), pages 98-118, January.
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  13. Doornik, Jurgen A & Hendry, David F & Nielsen, Bent, 1998. " Inference in Cointegrating Models: UK M1 Revisited," Journal of Economic Surveys, Wiley Blackwell, vol. 12(5), pages 533-72, December.
  14. Peter C.B. Phillips, 1995. "Impulse Response and Forecast Error Variance Asymptotics in Nonstationary VAR's," Cowles Foundation Discussion Papers 1102, Cowles Foundation for Research in Economics, Yale University.
  15. Hansen, Gerd, 2000. "The German labour market and the unification shock," Economic Modelling, Elsevier, vol. 17(3), pages 439-454, August.
  16. Ben S. Bernanke, 1986. "Alternative Explanations of the Money-Income Correlation," NBER Working Papers 1842, National Bureau of Economic Research, Inc.
  17. Lindbeck, Assar, 1992. "Macroeconomic theory and the labor market," European Economic Review, Elsevier, vol. 36(2-3), pages 209-235, April.
  18. Søren Johansen & Katarina Juselius, 1992. "Identification of the Long-Run and the Short-Run Structure: An Application to the ISLM Model," Discussion Papers 92-04, University of Copenhagen. Department of Economics.
  19. Olivier J. Blanchard & Mark W. Watson, 1986. "Are Business Cycles All Alike?," NBER Chapters, in: The American Business Cycle: Continuity and Change, pages 123-180 National Bureau of Economic Research, Inc.
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Cited by:
  1. Arntz, Melanie & Gregory, Terry & Lehmer, Florian, 2012. "Unequal Pay or Unequal Employment? What Drives the Skill-Composition of Labor Flows in Germany?," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62309, Verein für Socialpolitik / German Economic Association.

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