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Empirical Evidence on Inflation and Unemployment in the Long Run

Alfred Haug () and Ian King ()

No 1128, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: We examine the relationship between inflation and unemployment in the long run,using quarterly US data from 1952 to 2010. Using a band-pass filter approach, we find strong evidence that a positive relationship exists, where inflation leads unemployment by some 3 to 3.5 years, in cycles that last from 8 to 25 or 50 years. Our statistical approach is atheoretical in nature, but provides evidence in accordance with the predictions of Friedman (1977) and the recent New Monetarist model of Berentsen, Menzio, and Wright (2011): the relationship between inflation and unemployment is positive in the long run.

Keywords: Inflation; Unemployment; Long-Run Phillips Curve (search for similar items in EconPapers)
JEL-codes: E24 E31 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2011
New Economics Papers: this item is included in nep-cba, nep-lab, nep-mac and nep-mon
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Working Paper: Empirical Evidence on Inflation and Unemployment in the Long Run (2011) Downloads
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