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The European Unemployment Gap and the Role of Monetary Policy

Author

Listed:
  • Oreste Napolitano

    (Department of Economic Studies S. Vinci - University of Naples Parthenope)

  • Alberto Montagnoli

    (University of Stirling- Division of Economics)

Abstract

This study will shed some light on the debate on the impact of monetary policy on the labour market in Europe. The Phillips curve implies that demand-induced changes in inflation tend to lag behind movements in the unemployment rate, which means that a comparison between the actual unemployment rate and the NAIRU may be helpful in forecasting future changes in inflation. By using an unobserved component model with a Kalman filter we estimate the NAIRU for three countries in the euro area. Moreover, using a Markov switching model we investigate whether European monetary policy is responsible for these unemployment gaps and whether the interest rate is transmitted asymmetrically across countries

Suggested Citation

  • Oreste Napolitano & Alberto Montagnoli, 2010. "The European Unemployment Gap and the Role of Monetary Policy," Economics Bulletin, AccessEcon, vol. 30(2), pages 1346-1358.
    • Handle: RePEc:ebl:ecbull:eb-10-00012
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Monetary Policy; Unemployment Gap; Markov Switching Model;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E0 - Macroeconomics and Monetary Economics - - General

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