Asymmetry and the Problem of Aggregation in the Euro Area
AbstractThis paper highlights the implications for EU macroeconomic policy at a relatively disaggregated level when key economic relationships are nonlinear or asymmetric. Using data for the EU and OECD countries we show that there are considerable non-linearities and asymmetries in the Phillips and Okun curves. High unemployment has a relatively limited effect in pulling inflation down while low unemployment can be much more effective in driving it up. Downturns in the economy are both more rapid and sustained in driving unemployment up than recoveries are in bringing it down. There is considerable variety in these relationships and in IS curves across not just countries but also sectors and regions.
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Bibliographic InfoArticle provided by Springer in its journal Empirica.
Volume (Year): 29 (2002)
Issue (Month): 1 (March)
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Web page: http://www.springerlink.com/link.asp?id=100261
aggregation; asymmetry; monetary policy; nonlinear models; Okun curve; Phillips curve;
Other versions of this item:
- Mayes, David G & Virén, Matti, 2000. "Asymmetry and the Problem of Aggregation in the Euro Area," Research Discussion Papers 11/2000, Bank of Finland.
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
- J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
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