IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/26604.html
   My bibliography  Save this paper

Is the Phillips Curve of Germany Spurious?

Author

Listed:
  • Quaas, Georg
  • Klein, Mathias

Abstract

A simple plot of seasonal adjusted quarterly data between the change of nominal wage rates and the unemployment rate for the German economy shows a picture similar to that by which Phillips was inspired to his famous discovery, that there is a long-term tendency of a negative, non-linear relationship coupled with minor deviations from this tendency, which form so-called loops. At first sight, the Phillips Curve of Germany comprises clusters of data points and movements between these clusters. In spite of the striking differences of these phenomena, a model with one regression equation is sufficient to explain the loops, the movements between the loops and the long-term tendency of the German Phillips Curve. It might well be that the German Phillips Curve and the corresponding regressions are spurious, but an allegedly missing co-integration of wage rate changes and unemployment rate is not the argument that could be drawn on to sustain this scepticism. On the contrary, both variables are co-integrated. To get a more detailed insight into the relationship, the two variables are split into a trend and a cyclical component by the help of the HP-filter. The results of regression analyses applied to the separated components support Phillips’ hypothesis of a negative relationship between wage rate changes and the unemployment rate.

Suggested Citation

  • Quaas, Georg & Klein, Mathias, 2010. "Is the Phillips Curve of Germany Spurious?," MPRA Paper 26604, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:26604
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/26604/1/MPRA_paper_26604.pdf
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    as
    1. Gruen, David & Pagan, Adrian & Thompson, Christopher, 1999. "The Phillips curve in Australia," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 223-258, October.
    2. Jordi Galí, 2011. "The Return Of The Wage Phillips Curve," Journal of the European Economic Association, European Economic Association, vol. 9(3), pages 436-461, June.
    3. Granger, C. W. J., 1981. "Some properties of time series data and their use in econometric model specification," Journal of Econometrics, Elsevier, vol. 16(1), pages 121-130, May.
    4. Leonhard Dobusch & Jakob Kapeller, 2009. ""Why is Economics not an Evolutionary Science?" New Answers to Veblen's Old Question," Journal of Economic Issues, Taylor & Francis Journals, vol. 43(4), pages 867-898.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Wages; Unemployment; Phillips Curve;

    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
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:26604. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.