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Inflation-Unemployment Tradeoff and Regional Labor Market Data

Hassler, Uwe ; Neugart, Michael (2009)
Inflation-Unemployment Tradeoff and Regional Labor Market Data.
Report, Primary publication

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Item Type: Report
Type of entry: Primary publication
Title: Inflation-Unemployment Tradeoff and Regional Labor Market Data
Language: English
Date: 7 November 2009
Place of Publication: Darmstadt
Series: Darmstadt Discussion Papers in Economics
Series Volume: 112

We estimate a linear and a piecewise linear Phillips curve model with regional labor market data for West German and Neue Länder. Employing regional observations allows us to country difference the data. This eliminates, under the assumption of homogeneous Länder, supply shocks and changes in the formation of expectations as possible identification failures. With seemingly unrelated regressions we find a flat Phillips curve in the Neue Länder. For the West German Länder a piecewise linear model with a higher inflation-unemployment tradeoff for the regime of low unemployment rates fits the data very well. The results hold true if we control for endogeneity of the unemployment rate. With a kinked but upward sloping aggregate supply curve there seems to be room for stabilization policies, at least in the range of aggregate demand shifts that our data covers.

Uncontrolled Keywords: inflation-unemployment tradeoff, NAIRU, regional labor market data, seemingly unrelated regression
URN: urn:nbn:de:tuda-tuprints-48113
Additional Information:

JEL-classification: E24, E31; Erstellt September 2002

Classification DDC: 300 Social sciences > 330 Economics
Divisions: 01 Department of Law and Economics
01 Department of Law and Economics > Volkswirtschaftliche Fachgebiete
Date Deposited: 07 Nov 2009 08:55
Last Modified: 25 Oct 2023 07:31
URI: https://tuprints.ulb.tu-darmstadt.de/id/eprint/4811
PPN: 378484842
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