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Structural Unemployment and the Output Gap in Germany: Evidence from an SVAR Analysis within a Hysteresis Framework

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  • Ulrich Fritsche
  • Camille Logeay

Abstract

The German unemployment rate shows strong signs if non-stationarity over the course of the previous decades. This is in line with an insider-outsider model under full hysteresis. We applied a "theory-guided view" to the data using the structural VAR model as developed by Balmaseda, Dolado and López-Salido (2000) allowing for full hysteresis on the labour market. Our identification of the model implies long-lasting output gaps for Germany - especially for the disinflation period of the 1980s.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.38524.de/dp312.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 312.

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Length: 22 p.
Date of creation: 2002
Date of revision:
Handle: RePEc:diw:diwwpp:dp312

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Keywords: Structural unemployment; output gap; structural VAR; insider-outsider model;

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References

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  1. Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," NBER Working Papers 2737, National Bureau of Economic Research, Inc.
  2. Laurence Ball, 1999. "Aggregate demand and Long-Run Unemployment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(2), pages 189-252.
  3. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis And The European Unemployment Problem," NBER Chapters, National Bureau of Economic Research, Inc, in: NBER Macroeconomics Annual 1986, Volume 1, pages 15-90 National Bureau of Economic Research, Inc.
  4. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers, Princeton, Department of Economics - Econometric Research Program 338, Princeton, Department of Economics - Econometric Research Program.
  5. Balmaseda, Manuel & Dolado, Juan J & Lopez-Salido, J David, 2000. "The Dynamic Effects of Shocks to Labour Markets: Evidence from OECD Countries," Oxford Economic Papers, Oxford University Press, vol. 52(1), pages 3-23, January.
  6. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, Econometric Society, vol. 64(4), pages 813-36, July.
  7. Barnett, William A. & Solow, Robert, 2000. "An Interview With Franco Modigliani," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 4(02), pages 222-256, June.
  8. repec:cup:macdyn:v:4:y:2000:i:2:p:222-56 is not listed on IDEAS
  9. Jan Gottschalk, 2002. "Keynesian and Monetarist Views on the German Unemployment Problem � Theory and Evidence," Kiel Working Papers, Kiel Institute for the World Economy 1096, Kiel Institute for the World Economy.
  10. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, Econometric Society, vol. 48(1), pages 1-48, January.
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Citations

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Cited by:
  1. Ulrich Fritsche & Vladimir Kuzin, 2007. "Unit labor cost growth differentials in the Euro area, Germany, and the US: lessons from PANIC and cluster analysis," Macroeconomics and Finance Series, Hamburg University, Department Wirtschaft und Politik 200703, Hamburg University, Department Wirtschaft und Politik.
  2. Matthias Duschl & Thomas Brenner, 2013. "Growth dynamics in regional systems of technological activities – A SVAR approach," Working Papers on Innovation and Space 2013-12, Philipps University Marburg, Department of Geography.
  3. Kappler, Marcus, 2007. "Projecting the Medium-Term: Outcomes and Errors for GDP Growth," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 07-068, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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