Short-run and long-run interaction between inflation and unemployment in the USA

Antonio Ribba ()

Applied Economics Letters, 2003, vol. 10, issue 6, 373-376

Abstract: The aim of this study is to investigate both the short-run and long-run relationship between inflation and unemployment characterizing the US economy in the last 30 years. To this end a cointegrated structural VAR vs built. Since unemployment does not cause inflation at frequency zero a recursive structure, with inflation ordered first, allows the identification of a permanent and a transitory shock (cf. Ribba, Economics Letters 56, pp. 253-6, 1997). The main conclusions of the investigation are that: (i) in the short run, the existence of a tradeoff induced by the transitory shock is confirmed; (ii) in the long run, the two variables move one-for-one in the same direction driven by a permanent supply shock.

Date: 2003
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DOI: 10.1080/1350485032000081983

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