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"Economic Discomfort" in Germany 1951 to 2021: Results and policy implications

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  • Heilemann, Ullrich
  • Schuhr, Roland

Abstract

Okun's misery index (MI), the sum of unemployment rate and inflation rate, is a popular measure of the state of the economy and thus of (macro) '' Economic Discomfort'' as well as of government performance. We calculate the MI and some augmentations for Germany (until 1990: West Germany) for the period 1951-2021 and test them against a survey-based indicator of government performance ("ZDF-Politbarometer-Index"). The results support Okun's choice of variables, but reject its augmentation by the growth rate and the deficit ratio. Just as importantly, the effect of unemployment is almost twice as large as that of inflation, and both change considerably over time, as stability tests show. In assessing the performance of governments, MI rankings differ from those of their augmentations. Since the mid-1970s, however, the differences are limited. Barro's Misery Index, a comparative approach to assessing governments that is an alternative to MI, reaches opposite judgments than MI, but lacks empirical support. The implications for policymakers are both sobering and reassuring: as policy simulations and implied Phillips type trade-offs reveal, the sensitivity of MIs to macroeconomic policy is very low. This may not only hold for Germany given similar international evidence on MIs. The fact that the MI covers the two main macroeconomic objectives, is based on the latest official data, easy to calculate and internationally comparable makes Okun's Misery Index a useful indicator of Economic Discomfort for Germany as well.

Suggested Citation

  • Heilemann, Ullrich & Schuhr, Roland, 2025. ""Economic Discomfort" in Germany 1951 to 2021: Results and policy implications," Working Papers 183, University of Leipzig, Faculty of Economics and Management Science.
    • Handle: RePEc:zbw:leiwps:317773
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    References listed on IDEAS

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    More about this item

    Keywords

    Macroeconomic discomfort; Misery Index; Barro Misery Index; Government popularity;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government

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