NAIRU Estimates for Germany: New Evidence on the Inflation–Unemployment Tradeoff
Abstract Meaningful estimates of the non-accelerating inflation rate of unemployment (NAIRU) within a Phillips curve framework require an identified tradeoff between inflation and unemployment. However, observations of inflation and unemployment are equilibrium points giving rise to a simultaneity problem. We assess conventional identifying assumptions in the literature on the German NAIRU in a general bi-variate equations system of inflation and unemplyoment. We use a data-driven method for identification based on shifts in the relative volatility of shocks to unemployment and inflation to identify the tradeoff for Germany. Our results support models which estimate a contemporaneous effect of unemployment on inflation and those which model inflation and unemployment jointly.
Introductory Remarks 2 Part I. National and Regional Context of Policy-Making 2 Section 1. National context of policy-making 2 Section 2. Regional context 6 Section 3. SNA implementation 9 Part II. Europeanization Processes 11 Section 1. Adaptational pressures 11 Section 2. Resistance to change 13 Section 3. Evolution of central state policy-making structures 16 Section 4. Non-state actors 16 Section 5. Civic culture 18 Part III. Assessment of Learning Capacity 18 Section 1. Outcome 18 Section 2. Patterns of learning and adaptation 19 Section 3. Policy recommendations 21 References 22 Appendix 1: Interviewed actors / stakeholders and quantitative SNA results 25 Policy Area: Regional Policy. Case Study Region: Southern Transdanubia 25 Policy Area: Environmental Policy / Waste Management. Case Study Region: Central Hungary 29 Appendix 2: Map of Hungary with the two case study regions 24