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

Author Info

Listed author(s):
  • 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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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
Handle: RePEc:diw:diwwpp:dp312
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Keywords: Structural unemployment; output gap; structural VAR; insider-outsider model;

Find related papers by JEL classification:

  • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
  • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
  • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
  • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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  1. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-673, September.
  2. Barnett, William A. & Solow, Robert, 2000. "An Interview With Franco Modigliani," Macroeconomic Dynamics, Cambridge University Press, vol. 4(02), pages 222-256, June.
  3. repec:cup:macdyn:v:4:y:2000:i:2:p:222-56 is not listed on IDEAS
  4. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  5. 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.
  6. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," NBER Chapters,in: NBER Macroeconomics Annual 1986, Volume 1, pages 15-90 National Bureau of Economic Research, Inc.
  7. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
  8. Perron, Pierre & Rodriguez, Gabriel, 2003. "GLS detrending, efficient unit root tests and structural change," Journal of Econometrics, Elsevier, vol. 115(1), pages 1-27, July.
  9. 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.
  10. Gottschalk, Jan, 2002. "Keynesian and monetarist views on the German unemployment problem: theory and evidence," Kiel Working Papers 1096, Kiel Institute for the World Economy (IfW).
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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 200703, Hamburg University, Department Wirtschaft und Politik.
  2. Thomas Brenner & Matthias Duschl, 2015. "Causal dynamic effects in regional systems of technological activities: a SVAR approach," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 55(1), pages 103-130, October.
  3. Kappler, Marcus, 2007. "Projecting the Medium-Term: Outcomes and Errors for GDP Growth," ZEW Discussion Papers 07-068, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. 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.
  5. Houda Ben Hadj Boubaker, 2011. "Inflation Forecast-Based Rule for Inflation Targeting: Case of Some Selected MENA Countries," Working Papers 628, Economic Research Forum, revised 09 Jan 2011.

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