The US inflation-unemployment trade-off revisited: New evidence for policy-making

Marika Karanassou () and Hector Sala

Journal of Policy Modeling, 2010, vol. 32, issue 6, 758-777

Abstract: This paper addresses the various methodological issues surrounding vector autoregressions, simultaneous equations, and chain reactions, and provides new evidence on the long-run inflation-unemployment tradeoff in the US. It is argued that money growth is a superior indicator of the monetary environment than the federal funds rate and, thus, the focus is on the inflation/unemployment responses to money growth shocks. Structural vector autoregression (SVAR) and generalised method of moments (GMM) estimations confirm earlier findings in (Karanassou et al., 2005) and (Karanassou et al., 2008b) obtained from chain reaction structural models: the slope of the US Phillips curve is far from vertical, even in the long-run, which implies that the nominal and real sides of the economy are symbiotic. In the light of the significant and robust long-run inflation-unemployment tradeoffs, policy makers should reconsider the classical dichotomy thesis.

Keywords: Inflation; Unemployment; Money; growth; SVAR; GMM; Structural; modelling; Chain; reactions (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0161-8938(10)00074-8
Full text for ScienceDirect subscribers only

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: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:32:y::i:6:p:758-777

Access Statistics for this article

Journal of Policy Modeling is currently edited by A. M. Costa

More articles in Journal of Policy Modeling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().