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Inflation-Unemployment Tradeoff and Regional Labor Market Data

Hassler, Uwe and Neugart, Michael (2002):
Inflation-Unemployment Tradeoff and Regional Labor Market Data.
Darmstadt, In: Darmstadt Discussion Papers in Economics, [Online-Edition: http://econstor.eu/bitstream/10419/84856/1/ddpie_112.pdf],
[Report]

Abstract

We estimate a linear and a piecewise linear Phillips curve model with regional labor market data for West German and Neue Länder. Employing regional observations allows us to country difference the data. This eliminates, under the assumption of homogeneous Länder, supply shocks and changes in the formation of expectations as possible identification failures. With seemingly unrelated regressions we find a flat Phillips curve in the Neue Länder. For the West German Länder a piecewise linear model with a higher inflation-unemployment tradeoff for the regime of low unemployment rates fits the data very well. The results hold true if we control for endogeneity of the unemployment rate. With a kinked but upward sloping aggregate supply curve there seems to be room for stabilization policies, at least in the range of aggregate demand shifts that our data covers.

Item Type: Report
Erschienen: 2002
Creators: Hassler, Uwe and Neugart, Michael
Title: Inflation-Unemployment Tradeoff and Regional Labor Market Data
Language: English
Abstract:

We estimate a linear and a piecewise linear Phillips curve model with regional labor market data for West German and Neue Länder. Employing regional observations allows us to country difference the data. This eliminates, under the assumption of homogeneous Länder, supply shocks and changes in the formation of expectations as possible identification failures. With seemingly unrelated regressions we find a flat Phillips curve in the Neue Länder. For the West German Länder a piecewise linear model with a higher inflation-unemployment tradeoff for the regime of low unemployment rates fits the data very well. The results hold true if we control for endogeneity of the unemployment rate. With a kinked but upward sloping aggregate supply curve there seems to be room for stabilization policies, at least in the range of aggregate demand shifts that our data covers.

Series Name: Darmstadt Discussion Papers in Economics
Volume: 112
Place of Publication: Darmstadt
Uncontrolled Keywords: inflation-unemployment tradeoff, NAIRU, regional labor market data, seemingly unrelated regression
Divisions: 01 Department of Law and Economics
01 Department of Law and Economics > Volkswirtschaftliche Fachgebiete
Date Deposited: 07 Nov 2009 08:55
Official URL: http://econstor.eu/bitstream/10419/84856/1/ddpie_112.pdf
Additional Information:

JEL-classification: E24, E31

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