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Structural Unemployment and the Output Gap in Germany: Evidence from an SVAR Analysis within a Hysteresis Framework

Discussion Papers 312, 22 S.

Ulrich Fritsche, Camille Logeay

2002. Nov.

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The German unemployment rate shows strong signs if non-stationarity over the course of the previous decades. This is in line with an insider-outsider model under full hysteresis. We applied a "theory-guided view" to the data using the structural VAR model as developed by Balmaseda, Dolado and López-Salido (2000) allowing for full hysteresis on the labour market. Our identification of the model implies long-lasting output gaps for Germany - especially for the disinflation period of the 1980s.

JEL-Classification: E12;E32;J64;C32
Keywords: Structural unemployment, output gap, structural VAR, insider-outsider model
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