Jan Gottschalk

Monetary Policy and the German Unemployment Problem in Macroeconomic Models
Theory and Evidence

Contents

1 Introduction

2 Keynesian and Monetarist Views on the German Unemployment Problem
2.1 Keynesian and Monetarist Explanations of Unemployment and Inflation. - 2.1.1 The Keynesian Perspective. - 2.1.2 The Monetarist Challenge. - 2.1.3 The Keynesian Response to the Monetarist Revolution: The NAIRU. - 2.2 The Long-Run Phillips Curve and the Source of Business Cycle Fluctuations in Germany. - 2.2.1 The Unemployment-Inflation Relationship in Germany. - 2.2.2 Estimating Keynesian and Monetarist Phillips Curves for Germany. - 2.3 Conclusion

3 The Rational Expectations Revolution
3.1 New Classical Economics. - 3.2 Real Business Cycle Models. - 3.3 The New Keynesian Research Program. - 3.3.1 Empirical Evidence on the Effects of Systematic Policy. - 3.3.2 Revisiting the Policy Ineffectiveness Proposition. - 3.3.3 The Building Blocks of New Keynesian Economics

4 Monetary Policy in the New Keynesian Model
4.1 Deriving the Core Equations of the New Keynesian Model. - 4.1.1 The New Keynesian Phillips Curve. - 4.1.2 The New IS Curve. - 4.1.3 The Interest Rate Rule. - 4.2 Simulating the New Keynesian Model. - 4.2.1 The Standard New Keynesian Model. - 4.2.2 The Extended New Keynesian Model. - 4.2.3 The Sources of Business Cycle Fluctuations in the New Keynesian Model. - 4.2.4 The Effects of Systematic Policy. - 4.3 New Keynesian Economics and the Policy Debate in Germany

5 Introducing Nonlinearities into the New Keynesian Model
5.1 Nonlinearities in the Aggregate Supply Curve. - 5.1.1 Nonlinearities in the Supply Curve and Credit Market Imperfections. - 5.1.2 Nonlinearities in the Supply Curve and Downward Nominal Rigidities. - 5.1.3 Empirical Evidence on Nonlinearities in the Supply Curve. - 5.1.4 Policy Implications. - 5.2 Nonlinearities in the Welfare Function. - 5.2.1 The Inefficiency Gap and Business Cycle Fluctuations. - 5.2.2 The Welfare Effects of the Inefficiency Gap

6 Revisiting the Natural Rate Hypothesis
6.1 A Preliminary Look at the Data. - 6.2 A Framework for Cointegration Analysis. - 6.2.1 The Aggregate Demand Equation in the VECM. - 6.2.2 The Aggregate Supply Equation. - 6.2.3 The Policy Rule. - 6.3 Results of a Multivariate Cointegration Analysis for Germany. - 6.3.1 Testing for a Structural Break. - 6.3.2 Univariate Unit Root Tests. - 6.3.3 Results of the Multivariate Cointegration Analysis for the Period 1965–1979. - 6.3.4 Results of the Multivariate Cointegration Analysis for the Period 1979–1998. -6.3.5 A Long-Run Phillips Curve. - 6.4 Explaining the Long-Run Phillips Curve. - 6.4.1 Asymmetric Information Models. - 6.4.2 Nonlinearities in the Long-Run Phillips Curve. - 6.4.3 Disinflation and Hysteresis Effects. - 6.4.4 Using Monetary Policy to Lower the Unemployment Rate Permanently. - 6.5 A New Keynesian Model with Hysteresis

7 Concluding Remarks

Appendix
A.1 Appendix for Chapter 2. - A.2 Appendix for Chapter 6. - A.3 An Introduction into the SVAR Methodology. - A.3.1 Introduction. - A.3.2 Identification in Macroeconometric Models: A Traditional Perspective. - A.3.3 The SVAR Methodology. - A.3.4 Objections to the SVAR Methodology. - A.3.5 Conclusion