Hostname: page-component-586b7cd67f-dlnhk Total loading time: 0 Render date: 2024-11-28T17:45:30.140Z Has data issue: false hasContentIssue false
  • English
  • Français

PATTERNS OF UNEMPLOYMENT DYNAMICS IN GERMANY

Published online by Cambridge University Press:  30 October 2017

Daniela Rahn  and
Enzo Weber
Daniela Rahn*
Affiliation:
Deutsche Bundesbank*
Enzo Weber
Affiliation:
IAB and University of Regensburg
*
Address correspondence to: Daniela Rahn, Deutsche Bundesbank, Wilhelm-Epstein-Straße 14, 60431 Frankfurt am Main, Germany; e-mail: [email protected].
Get access Rights & Permissions [Opens in a new window]

Abstract

Using a structural vector autoregressive (SVAR) model, this paper provides deeper insight into unemployment dynamics in Germany. We identify a technology shock and two policy shocks that play a central role in business cycle research. Accordingly, we enrich the discussion on the sources of unemployment dynamics by considering demand-side impulses. The worker reallocation process varies substantially with the identified shocks. The job-finding rate plays a larger role after a technology shock and a monetary policy shock, whereas the separation rate appears to be the dominant margin after a fiscal policy shock. Technology shocks turn out to be relatively important for variations in the transition rates. Regarding policy shocks, our results point toward fiscal interventions as a promising instrument but with several limitations.

Keywords

Unemployment DynamicsTransition RatesSVARPolicy Shocks
Type
Articles
Information
Macroeconomic Dynamics , Volume 23 , Issue 1 , January 2019 , pp. 322 - 357
Copyright
Copyright © Cambridge University Press 2017 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

*

The views expressed in this article represent the author's personal opinions and do not necessarily reflect the views of the Deutsche Bundesbank or its staff.

References

REFERENCES

Alexius, A. and Holmlund, B. (2008) Monetary policy and Swedish unemployment fluctuations. Economics–The Open-Access, Open-Assessment E-Journal 2, 1–25.Google Scholar
Balleer, A. (2012) New evidence, old puzzles: Technology shocks and labor market dynamics. Quantitative Economics 3 (3), 363–392.Google Scholar
Barnichon, R. (2007) The Shimer Puzzle and the Correct Identification of Productivity Shocks. CEP discussion papers 0823, Centre for Economic Performance, LSE.Google Scholar
Baum, A. and Koester, G. B. (2001) The Impact of Fiscal Policy on Economic Activity Over the Business Cycle–Evidence from a Threshold VAR Analysis. Discussion paper series 1: Economic Studies 03/2011, Deutsche Bundesbank.Google Scholar
Blanchard, O., Dell'Ariccia, G. and Mauro, P. (2010) Rethinking macroeconomic policy. Journal of Money, Credit and Banking 42 (SPN/10/03), 199–215.Google Scholar
Blanchard, O. and Gali, J. (2008) Labor markets and monetary policy: A new Keynesian model with unemployment. American Economic Journal: Macroeconomics 2 (2), 1–30.Google Scholar
Blanchard, O. and Perotti, R. (2002) An empirical characterization of the dynamic effects of changes in government spending and taxes on output. Quarterly Journal of Economics 117 (4), 1329–1368.Google Scholar
Bode, O., Gerke, R. and Schellhorn, H. (2006) Die Wirkungen fiskalpolitischer Schocks auf das Bruttoinlandsprodukt. Arbeitspapier 01/2006, Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.Google Scholar
Braun, H., De Bock, R. and DiCecio, R. (2009) Supply shocks, demand shocks, and labor market fluctuations. Federal Reserve Bank of St. Louis Review 91 (3), 155–178.Google Scholar
Canova, F., Lopez-Salido, D. and Michelacci, C. (2013) The ins and outs of unemployment: An analysis conditional on technology shocks. Economic Journal 123 (569), 515–539.Google Scholar
Christiano, L. J., Eichenbaum, M. and Evans, C. (1996) The effects of monetary policy shocks: Evidence from the flow of funds. Review of Economics and Statistics 78 (1), 16–34.Google Scholar
Cogley, T. and Nason, J. M. (1995) Effects of the Hodrick–Prescott filter on trend and difference stationary time series - implications for business cycle research. Journal of Economic Dynamics and Control 19 (1–2), 253–278.Google Scholar
Fernald, J. G. (2007) Trend breaks, long-run restrictions, and contractionary technology improvements. Journal of Monetary Economics 54 (8), 2467–2485.Google Scholar
Fisher, J. D. M. (2006) The dynamic effects of neutral and investment-specific technology shocks. Journal of Political Economy 114 (3), 413–451.Google Scholar
Fitzenberger, B. and Wilke, R. A. (2010) Unemployment durations in West Germany before and after the reform of the unemployment compensation system during the 1980s. German Economic Review 11, 336–366.Google Scholar
Fujita, S. (2011) Dynamics of worker flows and vacancies: Evidence from the sign restriction approach. Journal of Applied Econometrics 26 (1), 89–121.Google Scholar
Fujita, S. (2015) Declining Labor Turnover and Turbulence. Working papers 15-29, Federal Reserve Bank of Philadelphia.Google Scholar
Gali, J. (1999) Technology, employment, and the business cycle: Do technology shocks explain aggregate fluctuations? American Economic Review 89 (1), 249–271.Google Scholar
Gartner, H., Merkl, C. and Rothe, T. (2012) Sclerosis and large volatilities: Two sides of the same coin. Economics Letters 117 (1), 106–109.Google Scholar
Islas-Camargo, A. and Cortez, W. W. (2011) How Relevant is Monetary Policy to Explain Mexican Unemployment Fuctuations? MPRA paper no. 30027, Instituto Tecnologico Autonomo de Mexico, Universidad de Guadalajara.Google Scholar
Jones, S. R. G. and Riddell, W. C. (1999) The measurement of unemployment: An empirical approach. Econometrica 67 (1), 147–162.Google Scholar
Jung, P. and Kuhn, M. (2014) Labor market institutions and worker flows: Comparing Germany and the U.S. Economic Journal 124, 1317–1342.Google Scholar
Kato, R. R. and Miyamoto, H. (2013) Fiscal Stimulus in an Endogenous Job Separation Model. Economics & Management Series (EMS) 2013-02, International University of Japan.Google Scholar
Klinger, S. and Weber, E. (2015) GDP-Employment Decoupling and the Productivity Puzzle in Germany. Working papers in Business, Economics and Management Information Systems 485, University of Regensburg.Google Scholar
Klinger, S. and Weber, E. (2016) Decomposing beveridge curve dynamics by correlated unobserved components. Oxford Bulletin of Economics and Statistics 78 (6), 877–894.Google Scholar
Krause, M. U. and Lubik, T. A. (2007) The (ir)relevance of real wage rigidity in the new Keynesian model with search frictions. Journal of Monetary Economics 54 (3), 706–727.Google Scholar
Lütkepohl, H. (2005) New Introduction to Multiple Time Series Analysis. Berlin/New York: Springer.Google Scholar
Merz, M. (1995) Search in the labor market and the real business cycle. Journal of Monetary Economics 36 (2), 269–300.Google Scholar
Monacelli, T., Perotti, R. and Trigari, A. (2010) Unemployment fiscal multipliers. Journal of Monetary Economics 57 (5), 531–553.Google Scholar
Nordmeier, D. (2014) Worker flows in Germany: Inspecting the time aggregation bias. Labour Economics 28, 70–83.Google Scholar
Nordmeier, D., Schmerer, H.-J. and Weber, E. (2016) Trade and labor market dynamics: What do we learn from the data? Economics Letters 145 (8), 206–209.Google Scholar
Ravn, M. O. and Simonelli, S. (2008) Labor market dynamics and the business cycle: Structural evidence for the United States. Scandinavian Journal of Economics 109 (4), 743–777.Google Scholar
Shimer, R. (2005) The cyclical behavior of equilibrium unemployment and vacancies. American Economic Review 95 (1), 25–49.Google Scholar
Sims, C. A., Stock, J. H. and Watson, M. W. (1990) Inference in linear time series models with some unit roots. Econometrica 58 (1), 113–144.Google Scholar
Smolny, W. (2012) Cyclical adjustment, capital-labor substitution and total factor productivity convergence–East Germany after unification. Jahrbücher für Nationalökonomie und Statistik 232 (4), 445–459.Google Scholar
Statistisches Bundesamt (2012) Volkswirtschaftliche Gesamtrechnungen. Inlandsproduktberechnung, Detaillierte Jahresergebnisse, Fachserie 18, Reihe 1.4, Statistisches Bundesamt, Wiesbaden.Google Scholar
Tenhofen, J., Wolff, G. B. and Heppke-Falk, K. H. (2010) The macroeconomic effects of exogenous fiscal policy shocks in Germany: A disaggregated SVAR analysis. Jahrbücher für Nationalökonomie und Statistik 230 (3), 328–355.Google Scholar
Thomas, C. (2008) Search and matching frictions and optimal monetary policy. Journal of Monetary Economics 55 (5), 936–956.Google Scholar
Turrini, A. (2012) Fiscal Consolidation in Reformed and Unreformed Labour Markets: A look at EU Countries. European Economy–Economic papers 462, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.Google Scholar
Walsh, C. E. (2005) Labor market search, sticky prices, and interest rate policies. Review of Economic Dynamics 8 (4), 829–849.Google Scholar