Sources of German Unemployment: Evidence from a Structural VAR Model
European Central Bank (ECB); Institute for the Study of Labor (IZA)
July 15, 2001
ZEW Discussion Paper No. 01-41
This paper analyzes the dynamic effects of different macroeconomic shocks on unemployment in Germany. In a first step, a cointegration analysis of productivity, prices, real wages, employment, and the unemployment rate reveals two long run relationships, interpreted as a labor demand and a wage setting scheme. Secondly, a structural VAR model is identified using the restrictions suggested by a single macroeconomic model. The impulse response analysis and the forecast error variance decomposition display that price, demand, and labor supply shocks affect unemployment significantly in the short/medium run. Interestingly, however, wage and technology shocks do not seem to play a dominant role.
Number of Pages in PDF File: 34
Keywords: Unemployment, Structural VAR, Cointegration
JEL Classification: J60, E24working papers series
Date posted: April 2, 2003
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