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

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  • Florian Kajuth

Abstract

The paper estimates the NAIRU from a Phillips curve relationship in the state-space framework. To identify the inflation-unemployment trade-off we account for a time-varying inflation trend to control for the part of inflation that is not affected by the cyclical component of unemployment. In addition we use shifts in the relative volatility of shocks to unemployment and inflation to address the simultaneity problem in Phillips curve estimations. Applying the method of Rigobon and Sack (2003) allows for a data driven identification of the contemporaneous coefficients on the unemployment gap in the Phillips curve and yields more precise estimates of the structural coefficients in the Phillips curve. This tightens the economic relation on the basis of which the NAIRU is derived.
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  • Florian Kajuth, 2016. "NAIRU Estimates for Germany: New Evidence on the Inflation–Unemployment Tradeoff," German Economic Review, Verein für Socialpolitik, vol. 17(1), pages 104-125, February.
    • Handle: RePEc:bla:germec:v:17:y:2016:i:1:p:104-125
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    File URL: http://hdl.handle.net/10.1111/geer.12055
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    Cited by:

    1. 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.
    2. 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.
    3. De la Serve, M-E. & Lemoine, M., 2011. "Measuring the NAIRU: a complementary approach," Working papers 342, Banque de France.

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    More about this item

    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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