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The Classical Dichotomy fails in the Eurozone

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  • Andrea Vaona

    (University of Verona, Department of Economic Sciences, and Kiel Institute for the World Economy)

Abstract

By means of structural VARs we investigate the long-run nexus between inflation and output in the Eurozone under different identification schemes and model specifications. The Eurozone is an interesting case study due to its very low inflation rate and to the official adherence of its monetary authority to the classical dichotomy. We find a strong positive long-run connection between inflation and output, supporting recent theoretical models arguing that this might exist at low long-run inflation rates.

Suggested Citation

  • Andrea Vaona, 2016. "The Classical Dichotomy fails in the Eurozone," Economics Bulletin, AccessEcon, vol. 36(4), pages 2183-2191.
    • Handle: RePEc:ebl:ecbull:eb-15-00465
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    More about this item

    Keywords

    long-run; non-vertical Phillips curve; empirical evidence;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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