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  1. The European Commission's new NAIRU
    does it deliver?
    Author: Gechert, Sebastian; Rietzler, Katja; Tober, Silke
    Published: 2014
    Publisher:  Hans-Böckler-Stiftung, Düsseldorf

    The NAIRU is a key component of potential output and as such critically affects output gap estimates. In May 2014, the European Commission changed its specification of the NAIRU for several countries and lowered its NAIRU estimates - in the case of... more

    Location:
    ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
    Signature:
    DS 488 (142)
    Inter-library loan:
    No inter-library loan

     

    The NAIRU is a key component of potential output and as such critically affects output gap estimates. In May 2014, the European Commission changed its specification of the NAIRU for several countries and lowered its NAIRU estimates - in the case of Spain from 26.6% to 20.7% for 2015. To test the dependence of the new NAIRU on unemployment versus structural factors, we run counterfactual simulations applying one-standard deviation shocks to actual unemployment and to the structural variable - real unit labor costs. We find that the NAIRU in its new specification is still largely determined by actual unemployment. This calls in question both the interpretation of potential output estimates as barriers to more vigorous inflation-stable economic activity and the accuracy of structural deficit figures. Die NAIRU ist ein zentraler Bestandteil des Produktionspotenzials und hat damit einen entscheidenden Einfluss auf Schätzungen der Produktionslücke. Im Mai 2014 hat die Europäische Kommission die Spezifikation ihrer NAIRU-Schätzung für mehrere Länder geändert und ihre NAIRU-Schätzwerte gesenkt - im Fall Spaniens von 26,6 % auf 20,7 % für das Jahr 2015. Um zu prüfen, ob die neue NAIRU eher von der tatsächlichen Arbeitslosigkeit oder von strukturellen Faktoren abhängt, führen wir kontrafaktische Simulationen durch, bei denen die tatsächliche Arbeitslosigkeit und die strukturelle Variable - die realen Lohnstückkosten - jeweils einem Schock im Umfang von einer Standardabweichung unterworfen werden. Wir gelangen zu dem Ergebnis, dass die NAIRU auch in ihrer neuen Spezifikation großenteils durch die tatsächliche Arbeitslosigkeit bestimmt wird. Dies wirft Zweifel an der Interpretation der Produktionspotenzialschätzungen als Barriere für eine kräftigere inflationsstabile Wirtschaftsaktivität und an der Genauigkeit der strukturellen Defizitwerte auf.

     
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    Content information
    Source: Union catalogues
    Language: English
    Media type: Book
    Format: Online
    Other identifier:
    hdl: 10419/106008
    Series: Working paper / IMK, Institut für Makroökonomie ; 142
    Subjects: NAIRU; Kalman filter; output gap; euro area; structural deficit
    Scope: Online-Ressource (7 S.), graph. Darst.
    Notes:

    Zsfassung in dt. Sprache
  2. The Phillips Curve: (in)stability, the role of credit, and implications for potential output measurement
    Author: Schleer, Frauke; Kappler, Marcus
    Published: 2014
    Publisher:  ZEW, Mannheim

    The path of output prior to the financial and economic crisis turned out to be not sustainable and lower than previously estimated in some European crisis countries. Specifically, the output gaps have been underestimated (and inversely potential... more

    Location:
    Niedersächsische Staats- und Universitätsbibliothek Göttingen
    Inter-library loan:
    No inter-library loan

    Location:
    ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
    Signature:
    DS 15 (2014,67)
    Inter-library loan:
    No inter-library loan

     

    The path of output prior to the financial and economic crisis turned out to be not sustainable and lower than previously estimated in some European crisis countries. Specifically, the output gaps have been underestimated (and inversely potential output overestimated) before the recent crisis. It is fair to say that the employed estimation techniques failed to provide valid real-time assessments of the state of the credit boom driven euro area economies. One reason for this may be the breakdown of the Phillips curve relationship during the last years. Against this backdrop, we comprehensively analyse the validity of the Phillips curve for five European countries with a focus on the recent crisis. We find that a mostly insignificant relation between inflation and the output gap or unemployment gap, which questions the adequacy of the Phillips curve to identify the sustainable level of output in an economy. The credit-driven boom in crisis countries has made clear that (disadvantageous) financial markets conditions may result in structural and long-term real economic distortions that are not yet taken into account in conventional methods for the estimation of potential output and the output gap. Since both, potential output and output gaps, are a key notion in policymaking, incorporating financial factors could improve the reliability of the estimates. Our results point in this direction.

     
    Export to reference management software   RIS file
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    Content information
    Source: Union catalogues
    Language: English
    Media type: Book
    Format: Online
    Other identifier:
    hdl: 10419/102752
    Series: Discussion paper / ZEW ; 14-067
    Subjects: Phillips curve; potential output; output gap; financial cycle; credit cycle; NAIRU
    Scope: Online-Ressource (21 S.), graph. Darst.