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https://hdl.handle.net/10419/18372
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DC Field | Value | Language |
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dc.contributor.author | Gottschalk, Jan | en |
dc.contributor.author | Fritsche, Ulrich | en |
dc.date.accessioned | 2009-01-28T15:43:02Z | - |
dc.date.available | 2009-01-28T15:43:02Z | - |
dc.date.issued | 2005 | - |
dc.identifier.uri | http://hdl.handle.net/10419/18372 | - |
dc.description.abstract | New-Keynesian macroeconomic models typically assume that any long-run trade-off between inflation and unemployment is ruled out. While this appears to be a reasonable characterization of the US economy, it is less clear that the natural rate hypothesis necessarily holds in a European country like Germany where hysteretic effects may invalidate it. Inspired by the framework developed by Farmer (2000) and Beyer and Farmer (2002), we investigate the long-run relationships between the interest rate, unemployment and inflation in West Germany from the early 1960s up to 2004 using a multivariate cointegration analysis technique. The results point to a structural break in the late 1970s. In the later time period we find for West German data a strong negative correlation between the trend components of inflation and unemployment. We show that this finding contradicts the natural rate hypothesis, introduce a version of the New Keynesian model which allows for some hysteresis and compare the effectiveness of monetary policy in these two models. In general, a policy rule with an aggressive response to a rise in unemployment performs better in a model with hysteretic characteristics than in a model without. | en |
dc.language.iso | eng | en |
dc.publisher | |aDeutsches Institut für Wirtschaftsforschung (DIW) |cBerlin | en |
dc.relation.ispartofseries | |aDIW Discussion Papers |x521 | en |
dc.subject.jel | C32 | en |
dc.subject.jel | B22 | en |
dc.subject.jel | E24 | en |
dc.subject.ddc | 330 | en |
dc.subject.keyword | Cointegration | en |
dc.subject.keyword | Vector Error CorrectionModel | en |
dc.subject.keyword | Unemployment | en |
dc.subject.keyword | Phillips Curve | en |
dc.subject.keyword | Hysteresis | en |
dc.title | The New Keynesian Model and the Long-Run Vertical Phillips Curve: Does It Hold for Germany? | - |
dc.type | Working Paper | en |
dc.identifier.ppn | 504313746 | en |
dc.rights | http://www.econstor.eu/dspace/Nutzungsbedingungen | en |
dc.identifier.repec | RePEc:diw:diwwpp:dp521 | en |
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