Quaas, Georg and Klein, Mathias (2010): Is the Phillips Curve of Germany Spurious?
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A simple plot of seasonal adjusted quarterly data between the change of nominal wage rates and the unemployment rate for the German economy shows a picture similar to that by which Phillips was inspired to his famous discovery, that there is a long-term tendency of a negative, non-linear relationship coupled with minor deviations from this tendency, which form so-called loops. At first sight, the Phillips Curve of Germany comprises clusters of data points and movements between these clusters. In spite of the striking differences of these phenomena, a model with one regression equation is sufficient to explain the loops, the movements between the loops and the long-term tendency of the German Phillips Curve. It might well be that the German Phillips Curve and the corresponding regressions are spurious, but an allegedly missing co-integration of wage rate changes and unemployment rate is not the argument that could be drawn on to sustain this scepticism. On the contrary, both variables are co-integrated. To get a more detailed insight into the relationship, the two variables are split into a trend and a cyclical component by the help of the HP-filter. The results of regression analyses applied to the separated components support Phillips’ hypothesis of a negative relationship between wage rate changes and the unemployment rate.
|Item Type:||MPRA Paper|
|Commentary on:||Quaas, Georg and Klein, Mathias (2010): Clusters and Loops of the German Phillips Curve.|
|Original Title:||Is the Phillips Curve of Germany Spurious?|
|Keywords:||Wages, Unemployment, Phillips Curve|
|Subjects:||E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment > E24 - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E13 - Neoclassical
|Depositing User:||Georg Quaas|
|Date Deposited:||10. Nov 2010 15:50|
|Last Modified:||13. Feb 2013 11:18|
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Quaas, Georg and Klein, Mathias
Clusters and Loops of the German Phillips Curve. (deposited 07. Jun 2010 09:44)
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