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What Drives US Inflation and Unemployment in the Long Run?

Antonio Ribba ()

Center for Economic Research (RECent) from University of Modena and Reggio E., Dept. of Economics "Marco Biagi"

Abstract: There is a growing consensus on the existence of a positive, long-run relation between inflation and unemployment in the US economy. However, the conclusion that the two variables move in the same direction at low frequencies leaves open the question of the identification of the factors - real or, alternatively, monetary - underlying this co-movement. In this paper we try to shed light on this question by adopting a structural VAR agnostic approach. The main conclusion is that in the postwar US economy an important role has been played by supply shocks in shaping the long-run evolution of unemployment. Thus, it seems that this evidence is at odds with purely monetary explanation of the co-movement between inflation and unemployment.

Keywords: Long-run Unemployment; Inflation; Structural VARs (search for similar items in EconPapers)
JEL-codes: E32 E62 C32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-mac
Date: 2015-05
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Persistent link: https://EconPapers.repec.org/RePEc:mod:recent:111

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