Estimating the time-varying NAIRU for Germany and policy implications
This article extends Ball and Mankiw (2002) and applies the Hodrick-Prescott filter (1997) to estimate the time-varying NAIRU for Germany. The slope estimate of the Phillips curve is insignificant when the widely used lagged inflation rate πt-1 is selected as a proxy for the expected inflation rate. The average inflation rate in past 4 years is a better proxy for the expected inflation rate. Estimated NAIRUs with λ = 1000 show a steady rising trend. The estimated NAIRU of 9.84% with λ = 1000 in 2005 is slightly higher than the actual unemployment rate of 9.70% in 2005, suggesting that monetary easing or large deficit spending may cause the inflation rate to accelerate.
Year of publication: |
2009
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Authors: | Hsing, Yu |
Published in: |
Applied Economics Letters. - Taylor & Francis Journals, ISSN 1350-4851. - Vol. 16.2009, 5, p. 469-473
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Publisher: |
Taylor & Francis Journals |
Saved in:
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