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Sources of German unemployment: evidence from a structural VAR model

  • Linzert, Tobias

This paper analyzes the dynamic effects of different macroeconomic shocks on unemployment in Germany. In a first step, a cointegration analysis of productivity, prices, real wages, employment, and the unemployment rate reveals two long run relationships, interpreted as a labor demand and a wage setting scheme. Secondly, a structural VAR model is identified using the restrictions suggested by a single macroeconomic model. The impulse response analysis and the forecast error variance decomposition display that price, demand, and labor supply shocks affect unemployment significantly in the short/medium run. Interestingly, however, wage and technology shocks do not seem to play a dominant role.

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 01-41.

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Date of creation: 2001
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Handle: RePEc:zbw:zewdip:5396
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  1. Kai Carstensen & Gerd Hansen, 2000. "Cointegration and common trends on the West German labour market," Empirical Economics, Springer, vol. 25(3), pages 475-493.
  2. Doornik, Jurgen A & Hendry, David F & Nielsen, Bent, 1998. " Inference in Cointegrating Models: UK M1 Revisited," Journal of Economic Surveys, Wiley Blackwell, vol. 12(5), pages 533-72, December.
  3. Bernanke, Ben S., 1986. "Alternative explanations of the money-income correlation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 49-99, January.
  4. repec:cup:macdyn:v:2:y:1998:i:4:p:472-91 is not listed on IDEAS
  5. Olivier J. Blanchard & Mark W. Watson, 1984. "Are Business Cycles All Alike?," NBER Working Papers 1392, National Bureau of Economic Research, Inc.
  6. Saikkonen, Pentti & Lutkepohl, Helmut, 2000. "Testing for the Cointegrating Rank of a VAR Process with Structural Shifts," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(4), pages 451-64, October.
  7. Alan Manning, 1992. "Wage Bargaining and the Phillips Curve: The Identification and Specification of Aggregate Wage Equations," CEP Discussion Papers dp0062, Centre for Economic Performance, LSE.
  8. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages C1-33, March.
  9. Hassler, Uwe & Wolters, Jurgen, 1995. "Long Memory in Inflation Rates: International Evidence," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 37-45, January.
  10. Dolado, Juan J. & Jimeno, Juan F., 1997. "The causes of Spanish unemployment: A structural VAR approach," European Economic Review, Elsevier, vol. 41(7), pages 1281-1307, July.
  11. Andersen, Torben M. & Hylleberg, Svend, 1998. "Wage Adjustment And Employment Persistency," Macroeconomic Dynamics, Cambridge University Press, vol. 2(04), pages 472-491, December.
  12. Lindbeck, Assar, 1992. "Macroeconomic theory and the labor market," European Economic Review, Elsevier, vol. 36(2-3), pages 209-235, April.
  13. Johansen, Soren & Juselius, Katarina, 1994. "Identification of the long-run and the short-run structure an application to the ISLM model," Journal of Econometrics, Elsevier, vol. 63(1), pages 7-36, July.
  14. C Bean, 1992. "European Unemployment: A Survey," CEP Discussion Papers dp0071, Centre for Economic Performance, LSE.
  15. Scott, Alasdair, 2003. "APPLIED MACROECONOMETRICS Carlo A. Favero Oxford University Press, 2001," Macroeconomic Dynamics, Cambridge University Press, vol. 7(02), pages 313-315, April.
  16. Blanchard, Olivier Jean, 1989. "A Traditional Interpretation of Macroeconomic Fluctuations," American Economic Review, American Economic Association, vol. 79(5), pages 1146-64, December.
  17. Jennifer Hunt, 1992. "The Effect of Unemployment Compensation on Unemployment Duration in Germany," Discussion Papers of DIW Berlin 50, DIW Berlin, German Institute for Economic Research.
  18. Hansen, Gerd, 2000. "The German labour market and the unification shock," Economic Modelling, Elsevier, vol. 17(3), pages 439-454, August.
  19. Carlton, Dennis W, 1986. "The Rigidity of Prices," American Economic Review, American Economic Association, vol. 76(4), pages 637-58, September.
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