Will the (German) NAIRU Please Stand Up?

Franz Wolfgang
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Franz Wolfgang: Center of European Economic Research (ZEW),Mannheim, Germany

German Economic Review, 2005, vol. 6, issue 2, 131-153

Abstract: This paper deals with a critical assessment of the ‘non-accelerating inflation rate of unemployment’ (NAIRU) for Germany. There are quite a few obstacles to perceiving the NAIRU as an easy-to-use analytical instrument: the possibility of a non-vertical Phillips curve, the occurrence of shocks and hysteresis effects, and the (mis-)measurement of important variables, cointegration issues and a time variability of the NAIRU. A new attempt is made to estimate a NAIRU for Germany using direct measures of inflationary expectations. However, by any method, the NAIRU is very hard to determine and subject to considerable arbitrariness.

Keywords: NAIRU; unemployment; inflation; Phillips curve; natural rate; hysteresis; supply shocks; inflation expectations (search for similar items in EconPapers)
Date: 2005
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DOI: 10.1111/j.1465-6485.2005.00124.x

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