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The Inflation-Unemployment Trade-Off: Empirical Considerations and a Simple US-Euro Area Comparison

Author

Listed:
  • Vasco J. Gabriel

    (University of Victoria, Canada)

  • Young-Bae Kim

    (Cheongju University, South Korea)

  • Luis Martins

    (ISCTE-LUI, Portugal)

  • Paul Middleditch

    (University of Manchester, United Kingdom)

Abstract

’This paper uses recently developed robust estimation methods to empirically reassess the long-standing inflation-unemployment trade-off debate. Indeed, we study to what extent unemployment-based New Keynesian Phillips Curves are informative about the relation-ship between inflation dynamics and labor market conditions. In particular, we attempt to quantify the elasticities of inflation with respect to unemployment in two economies, the US and the Euro Area, whose labor market characteristics are admittedly very different. We find that the relevance of the inflation-unemployment trade-off and its empirical ad-equacy is greatly enhanced once the informational content of key labor market variables is explored in our estimations.’

Suggested Citation

  • Vasco J. Gabriel & Young-Bae Kim & Luis Martins & Paul Middleditch, 2022. "The Inflation-Unemployment Trade-Off: Empirical Considerations and a Simple US-Euro Area Comparison," Notas Económicas, Faculty of Economics, University of Coimbra, issue 54, pages 9-29, July.
    • Handle: RePEc:gmf:journl:y:2022:i:54:p:9:29
    DOI: 10.14195/2183-203X_54_1
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    More about this item

    Keywords

    Phillips curve; unemployment; model averaging.;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation

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