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NAIRU Estimates for Germany: New Evidence on the Inflation–Unemployment Tradeoff

Author

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  • Kajuth Florian

    (Deutsche Bundesbank,Frankfurt pe Main, Germany)

Abstract

Meaningful estimates of the non-accelerating inflation rate of unemployment (NAIRU) within a Phillips curve framework require an identified tradeoff between inflation and unemployment. However, observations of inflation and unemployment are equilibrium points giving rise to a simultaneity problem. We assess conventional identifying assumptions in the literature on the German NAIRU in a general bi-variate equations system of inflation and unemplyoment. We use a data-driven method for identification based on shifts in the relative volatility of shocks to unemployment and inflation to identify the tradeoff for Germany. Our results support models which estimate a contemporaneous effect of unemployment on inflation and those which model inflation and unemployment jointly.

Suggested Citation

  • Kajuth Florian, 2016. "NAIRU Estimates for Germany: New Evidence on the Inflation–Unemployment Tradeoff," German Economic Review, De Gruyter, vol. 17(1), pages 104-125, February.
    • Handle: RePEc:bpj:germec:v:17:y:2016:i:1:p:104-125
    DOI: 10.1111/geer.12055
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    Cited by:

    1. is not listed on IDEAS
    2. Thomas A. Knetsch & Katja Sonderhof & Wolfram Kempe, 2014. "Das Erwerbspersonenpotenzial zu Vollzeitäquivalenten: Messkonzept, Projektion und Anwendungsbeispiele," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 134(1), pages 1-24.
    3. Marie-Elisabeth de la Serve & Matthieu Lemoine, 2011. "Measuring the NAIRU: a complementary approach," Working papers 342, Banque de France.
    4. OECD & Elena Rusticelli, 2014. "Rescuing the Phillips curve: Making use of long-term unemployment in the measurement of the NAIRU," OECD Journal: Economic Studies, OECD Publishing, vol. 2014(1), pages 109-127.

    More about this item

    Keywords

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    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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