In the long run, US unemployment follows inflation like a faithful dog

Haug, Alfred A. and King, Ian (2014) In the long run, US unemployment follows inflation like a faithful dog. Journal of Macroeconomics, 41 42-52. doi:10.1016/j.jmacro.2014.04.003


Author Haug, Alfred A.
King, Ian
Title In the long run, US unemployment follows inflation like a faithful dog
Journal name Journal of Macroeconomics   Check publisher's open access policy
ISSN 0164-0704
1873-152X
Publication date 2014-09-01
Sub-type Article (original research)
DOI 10.1016/j.jmacro.2014.04.003
Open Access Status Not Open Access
Volume 41
Start page 42
End page 52
Total pages 11
Place of publication Amsterdam, Netherlands
Publisher Elsevier
Language eng
Abstract Conventional wisdom holds that, in the long run, the Phillips curve is vertical. We re-examine the relationship between inflation and unemployment in the long run, using quarterly US data from 1952 to 2010, and state-of-the art econometric methods. Using a band-pass filter approach, we find strong evidence that a positive relationship exists, where inflation leads unemployment by some 3–3 1/2 the MathML source years, in cycles that last from 8 to 25 or 50 years. Tests for multiple structural changes at unknown dates show that this relationship is stable. 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 et al. (2011): the relationship between inflation and unemployment is positive in the long run.
Keyword Inflation
Unemployment
The long-run
Q-Index Code C1
Q-Index Status Provisional Code
Institutional Status Unknown

Document type: Journal Article
Sub-type: Article (original research)
Collection: School of Economics Publications
 
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Created: Sat, 12 Mar 2016, 02:30:14 EST by Karen Warren on behalf of School of Economics