Is There a Stable Relationship between Unemployment and Future Inflation? Evidence from U.S. Cities

Terry Fitzgerald and Juan Pablo Nicolini

No 713, Working Papers from Federal Reserve Bank of Minneapolis

Abstract: This paper makes two straightforward points that we argue are central to understanding the literature and debate surrounding the stability of the Phillips curve. First, the endogeneity of monetary policy implies that aggregate data are largely uninformative as to the existence of a stable relationship between unemployment and future inflation. Second, if the NAIRU model is assumed to be true, regional data can be used to identify the structural relationship between unemployment and future inflation. We find that a 1 percentage point increase in the unemployment rate is associated with a roughly 0.3 percentage point decline in inflation over the next year.

Keywords: Endogenous monetary policy; stability of the Phillips curve (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2014-05-30
New Economics Papers: this item is included in nep-cba, nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://www.minneapolisfed.org/research/wp/wp713.pdf Full text (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: https://EconPapers.repec.org/RePEc:fip:fedmwp:713

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of Minneapolis Contact information at EDIRC.
Bibliographic data for series maintained by Kate Hansel ().