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Asymmetry and the Problem of Aggregation in the Euro Area

  • Mayes, David G

    ()

    (Bank of Finland Research)

  • Virén, Matti

    ()

    (Bank of Finland Research)

This 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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File URL: http://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/0011.pdf
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Paper provided by Bank of Finland in its series Research Discussion Papers with number 11/2000.

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Length: 44 pages
Date of creation: 20 Sep 2000
Date of revision:
Handle: RePEc:hhs:bofrdp:2000_011
Contact details of provider: Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.suomenpankki.fi/en/

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  13. Eliasson, Ann-Charlotte, 1999. "Is the short-run Phillips curve nonlinear? Empirical evidence for Australia, Sweden and the United States," SSE/EFI Working Paper Series in Economics and Finance 330, Stockholm School of Economics.
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