The Classical Dichotomy fails in the Eurozone

Andrea Vaona

Economics Bulletin, 2016, vol. 36, issue 4, 2183-2191

Abstract: By means of structural VARs we investigate the long-run nexus between inflation and output in the Eurozone under different identification schemes and model specifications. The Eurozone is an interesting case study due to its very low inflation rate and to the official adherence of its monetary authority to the classical dichotomy. We find a strong positive long-run connection between inflation and output, supporting recent theoretical models arguing that this might exist at low long-run inflation rates.

Keywords: long-run; non-vertical Phillips curve; empirical evidence (search for similar items in EconPapers)
JEL-codes: E3 E5 (search for similar items in EconPapers)
Date: 2016-11-26
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