IDEAS home Printed from https://ideas.repec.org/p/zbw/sfb373/200119.html
   My bibliography  Save this paper

Sources of German unemployment: A structural vector error correction analysis

Author

Listed:
  • Brüggemann, Ralf

Abstract

In this paper we analyze the sources of German unemployment within a structural vector error correction model (SVECM) framework. For this purpose, we propose a method to estimate an exactly identified Subset SVECM, which is a SVECM with short run parameter restrictions. A cointegration analysis for the unified Germany reveals a long rum relationship between real wages, productivity and unemployment which is interpreted as a wage setting relation. From a Subset VECM we identify meaningful structural shocks and assess their importance for unemployment by impulse response analysis and forecast error variance decompositions. We compare these results to results from a standard SVECM and find that, using the Subset VECM reduces estimation uncertainty. In contrast to previous studies for West Germany, we find that, unemployment is equally determined by technology, labor supply and labor demand shocks in the long run. - Unemployment ; Subset VECM ; Structural VECM ; Bootstrap ; Cointegration

Suggested Citation

  • Brüggemann, Ralf, 2001. "Sources of German unemployment: A structural vector error correction analysis," SFB 373 Discussion Papers 2001,19, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    • Handle: RePEc:zbw:sfb373:200119
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/62675/1/724872310.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Tor Jacobson & Anders Vredin & Anders Warne, 1998. "Are Real Wages and Unemployment Related?," Economica, London School of Economics and Political Science, vol. 65(257), pages 69-96, February.
    2. Nyblom, Jukka & Harvey, Andrew, 2000. "Tests Of Common Stochastic Trends," Econometric Theory, Cambridge University Press, vol. 16(2), pages 176-199, April.
    3. 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.
    4. Kai Carstensen & Gerd Hansen, 2000. "Cointegration and common trends on the West German labour market," Empirical Economics, Springer, vol. 25(3), pages 475-493.
    5. 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 451-464, October.
    6. Fabiani, Silvia & Locarno, Alberto & Oneto, Gian Paolo & Sestito, Paolo, 2001. "The sources of unemployment fluctuations: an empirical application to the Italian case," Labour Economics, Elsevier, vol. 8(2), pages 259-289, May.
    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. King, Robert G. & Plosser, Charles I. & Stock, James H. & Watson, Mark W., 1991. "Stochastic Trends and Economic Fluctuations," American Economic Review, American Economic Association, vol. 81(4), pages 819-840, September.
    9. repec:bla:econom:v:53:y:1986:i:210(s):p:s1-22 is not listed on IDEAS
    10. Lutkepohl, Helmut & Saikkonen, Pentti, 2000. "Testing for the cointegrating rank of a VAR process with a time trend," Journal of Econometrics, Elsevier, vol. 95(1), pages 177-198, March.
    11. Junsoo Lee & Mark Strazicich, 2001. "Testing the null of stationarity in the presence of a structural break," Applied Economics Letters, Taylor & Francis Journals, vol. 8(6), pages 377-382.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Henry Muganza Ngongo & Antoine Kamiantako Miyamueni, 2018. "Chocs technologiques, chocs des prix et fluctuations du chômage en République Démocratique du Congo," Post-Print hal-01773922, HAL.
    2. Quarm, Richmond Sam & Busharads, Mohamed Osman Elamin & Institute of Research, Asian, 2020. "Cyclical Fluctuation, Growth, and Stabilization: An Empirical Investigation of Dual Policy Objectives in Bangladesh," OSF Preprints 45fwz, Center for Open Science.
    3. Sunde, Tafirenyika & Akanbi, Olusegun Ayodele, 2016. "The Dynamic Effects of Monetary Policy on Real Variables in Namibia," African Journal of Economic Review, African Journal of Economic Review, vol. 4(1), January.
    4. Antoine Kamiantako Miyamueni & Henry Ngongo Muganza, 2018. "Chocs technologiques, chocs des prix et fluctuations du ch\^omage en R\'epublique D\'emocratique du Congo," Papers 1804.09532, arXiv.org.
    5. Melike Bildirici & Elçin Aykaç Alp, 2012. "Minimum wage is efficient wage in Turkish labor market: TAR–cointegration analysis," Quality & Quantity: International Journal of Methodology, Springer, vol. 46(4), pages 1261-1270, June.
    6. Rita Duarte & Carlos Marques, 2013. "The dynamic effects of shocks to wages and prices in the United States and the Euro Area," Empirical Economics, Springer, vol. 44(2), pages 613-638, April.
    7. Moses M. Kupabado & Juergen Kaehler, 2021. "Financialization, common stochastic trends, and commodity prices," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(12), pages 1988-2008, December.
    8. Andreas Röthig, 2011. "On speculators and hedgers in currency futures markets: who leads whom?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 16(1), pages 63-69, January.
    9. Tafirenyika Sunde & Olusegun A. Akanbi, 2016. "Sources of unemployment in Namibia: an application of the structural VAR approach," International Journal of Sustainable Economy, Inderscience Enterprises Ltd, vol. 8(2), pages 125-143.
    10. Juan José Echavarría Soto & Enrique López Enciso & Martha Misas Arango, 2008. "La tasa de cambio real de equilibrio en Colombia y su desalineamiento: estimación a través de un modelo SVEC," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 26(57), pages 282-319, December.
    11. Mosso-Martínez, Margarita M. & López-Herrera, Francisco, 2020. "Variables económicas y deterioro de la calidad de la cartera de hipotecas bursatilizadas en México," eseconomía, Escuela Superior de Economía, Instituto Politécnico Nacional, vol. 15(52), pages 47-68, Primer se.
    12. Maciej Bukowski & Grzegorz Koloch & Piotr Lewandowski, 2013. "Shocks and rigidities as determinants of CEE labour markets’ performance," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 21(3), pages 553-581, July.
    13. Martha Misas Arango & Enrique López Enciso & Juana Téllez Corredor & José Fernando Escobar, 2005. "La Inflación Subyacente en Colombia: Un Enfoque de Tendencias Estocásticas Comunes Asociadas a un VEC Estructural," Borradores de Economia 324, Banco de la Republica de Colombia.
    14. Firew B Woldeyes, 2013. "Long-Run Effects of Resource Rents in Developing Countries: The role of public investment management," OxCarre Working Papers 105, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    15. Haffar, Adlane & Le Fur, Eric, 2021. "Structural vector error correction modelling of Bitcoin price," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 170-178.
    16. Silvia Fedeli & Francesco Forte, 2009. "The Laffer effects of a program of deregulation cum detaxation: the Italian reform of labour contracts in the period 1997–2001," European Journal of Law and Economics, Springer, vol. 27(3), pages 211-232, June.
    17. Andreas Röthig, 2009. "Microeconomic Risk Management and Macroeconomic Stability," Lecture Notes in Economics and Mathematical Systems, Springer, number 978-3-642-01565-6, October.
    18. Klemens Hauzenberger & Robert Stehrer, 2010. "An Empirical Characterization of Redistribution Shocks and Output Dynamics," wiiw Working Papers 68, The Vienna Institute for International Economic Studies, wiiw.
    19. Anita Staneva, 2008. "Analysis of the Labour Market in Bulgaria through a Error Correction Model," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 90-106.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sven Schreiber, 2012. "Estimating the natural rate of unemployment in euro-area countries with co-integrated systems," Applied Economics, Taylor & Francis Journals, vol. 44(10), pages 1315-1335, April.
    2. Kirstin Hubrich & Peter Vlaar, 2004. "Monetary transmission in Germany: Lessons for the Euro area," Empirical Economics, Springer, vol. 29(2), pages 383-414, May.
    3. Kirstin Hubrich & Peter J. G. Vlaar, 2000. "Germany and the Euro Area: Differences in the Transmission Process of Monetary Policy," Econometric Society World Congress 2000 Contributed Papers 1802, Econometric Society, revised 08 Nov 2000.
    4. Carsten Trenkler & Pentti Saikkonen & Helmut Lütkepohl, 2008. "Testing for the Cointegrating Rank of a VAR Process with Level Shift and Trend Break," Journal of Time Series Analysis, Wiley Blackwell, vol. 29(2), pages 331-358, March.
    5. Holmlund, Bertil & Alexius, Annika, 2008. "Monetary Policy and Swedish Unemployment Fluctuations," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 2, pages 1-25.
    6. Fukuda, Takashi & Dahalan, Jauhari, 2011. "“Finance-Growth-Crisis Nexus in India: Evidence from Cointegration and Causality Assessment” - L’interazione finanza-crescita-crisi in India: evidenze da una analisi di cointegrazione e causalità," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 64(3), pages 297-328.
    7. Ratti, Ronald A. & Vespignani, Joaquin L., 2015. "OPEC and non-OPEC oil production and the global economy," Energy Economics, Elsevier, vol. 50(C), pages 364-378.
    8. Nikolaos Giannellis & Minoas Koukouritakis, 2011. "Behavioural equilibrium exchange rate and total misalignment: evidence from the euro exchange rate," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 38(4), pages 555-578, November.
    9. Nazlioglu, Saban & Lee, Junsoo, 2020. "Response surface estimates of the LM unit root tests," Economics Letters, Elsevier, vol. 192(C).
    10. Skrobotov, Anton, 2021. "Structural breaks in cointegration models: Multivariate case," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 64, pages 83-106.
    11. Nedialko Nestorov, 2015. "Cointegration Approach – Application Opportunities," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 110-140.
    12. Fukuda, Takashi & Dahalan, Jauhari, 2011. "Finance-Growth-Crisis Nexus in India: Evidence from Cointegration and Causality Assessment," MPRA Paper 39467, University Library of Munich, Germany.
    13. repec:ksp:journ3:v:1:y:2015:i:4:p:256-274 is not listed on IDEAS
    14. Norman-Lόpez, Ana & Pascoe, Sean & Thébaud, Olivier & Van Putten, Ingrid & Innes, James & Jennings, Sarah & Hobday, Alistair & Green, Bridget & Plaganyi, Eva, 2014. "Price integration in the Australian rock lobster industry: implications for management and climate change adaptation," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 58(1), January.
    15. Carsten Trenkler*, 2005. "The Effects of Ignoring Level Shifts on Systems Cointegration Tests," AStA Advances in Statistical Analysis, Springer;German Statistical Society, vol. 89(3), pages 281-301, August.
    16. Håvard Hungnes, 2010. "Identifying Structural Breaks in Cointegrated Vector Autoregressive Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 72(4), pages 551-565, August.
    17. Ahking, Francis W., 2002. "Model mis-specification and Johansen's co-integration analysis: an application to the US money demand," Journal of Macroeconomics, Elsevier, vol. 24(1), pages 51-66, March.
    18. Lonnie Stevans & David Sessions, 2005. "An Empirical Investigation Into the Effect of Music Downloading on the Consumer Expenditure of Recorded Music: A Time Series Approach," Journal of Consumer Policy, Springer, vol. 28(3), pages 311-324, September.
    19. Byrne, Joseph P. & Nagayasu, Jun, 2010. "Structural breaks in the real exchange rate and real interest rate relationship," Global Finance Journal, Elsevier, vol. 21(2), pages 138-151.
    20. Trenkler, Carsten, 2009. "Bootstrapping Systems Cointegration Tests With A Prior Adjustment For Deterministic Terms," Econometric Theory, Cambridge University Press, vol. 25(1), pages 243-269, February.
    21. Andrade, Philippe & Bruneau, Catherine & Gregoir, Stephane, 2005. "Testing for the cointegration rank when some cointegrating directions are changing," Journal of Econometrics, Elsevier, vol. 124(2), pages 269-310, February.

    More about this item

    JEL classification:

    • 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
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

    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:zbw:sfb373:200119. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/sfhubde.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.