Publication

This paper tries to remedy some of the flaws which plagued previous NAIRU estimates for Germany by employing direct measures of inflation expectations stemming from the EC monthly survey. The authors estimate that the NAIRU in Germany is currently around 7 percent if the definition of unemployment follows the concept of the ILO or some 9 percent if measured according to the procedure applied by the German Federal Labor Agency. Because of this inaccuracy and because of various additional flaws the authors get to the conclusion that the NAIRU be only used as one of the tools to determine the unobservable natural rate of unemployment.