Disinflation and unemployment in the euro area: A SVAR-based analysis

Patrick Fève, Julien Matheron () and Jean-Guillaume Sahuc ()

Documents de Travail from Banque de France

Abstract: The present paper investigates the dynamic effects of disinflation shocks for a number of real macroeconomic variables in the euro area. Using structural VARs, we identify disinflation shocks as the only shocks that can exert a long--run effect on inflation as well as other nominal variables cointegrating with inflation. These shocks are found to generate large recessionary effects, notably when it comes to investment, and triggers a persistent rise in unemployment and in the real interest rate. The analysis is complemented by computing inefficiency measures on goods and labor markets. We show that, after a disinflation shock, inefficiencies in the labor market seem to prevail. These conclusions are robust to modifications of our baseline identification scheme.

Keywords: SVAR; long-run restrictions; disinflation. (search for similar items in EconPapers)
JEL-codes: C32 E31 E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eec and nep-mac
Date: 2009
View list of references

Downloads: (external link)
http://www.banque-france.fr/fr/publications/telech ... avail/2009/DT247.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:bfr:banfra:247

Access Statistics for this paper

More papers in Documents de Travail from Banque de France
Address: Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS
Contact information at EDIRC.
Series data maintained by Thierry Demoulin ().