Empirical Evidence on Inflation and Unemployment in the Long Run
Alfred Haug () and
Ian King ()
No 1109, Working Papers from University of Otago, Department of Economics
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 1/2 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: 32 pages
Date: 2011-08, Revised 2011-08
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http://www.otago.ac.nz/economics/research/otago076667.pdf This version, 2011 (application/pdf)
Working Paper: Empirical Evidence on Inflation and Unemployment in the Long Run (2011)
Working Paper: Empirical evidence on inflation and unemployment in the long run (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:otg:wpaper:1109
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