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Monetary Policy and Swedish Unemployment Fluctuations

  • Alexius, Annika

    (Department of Economics)

  • Holmlund, Bertil

    ()

    (Department of Economics)

A widely spread belief among economists is that monetary policy has relatively short-lived effects on real variables such as unemployment. Previous studies indicate that monetary policy affects the output gap only at business cycle frequencies, but the effects on unemployment may well be more persistent in countries with highly regulated labor markets. We study the Swedish experience of unemployment and monetary policy. Using a structural VAR we find that around 30 percent of the fluctuations in unemployment are caused by shocks to monetary policy. The effects are also quite persistent. In the preferred model, almost 30 percent of the maximum effect of a shock still remains after ten years.

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Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2007:17.

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Length: 27 pages
Date of creation: 18 Jun 2007
Date of revision:
Handle: RePEc:hhs:uunewp:2007_017
Contact details of provider: Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
Web page: http://www.nek.uu.se/
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  11. Galí, Jordi, 1996. "Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations?," CEPR Discussion Papers 1499, C.E.P.R. Discussion Papers.
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  16. Yannick L'horty & Christophe Rault, 2003. "Why Is French Equilibrium Unemployment So High?," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 127-156, May.
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  20. George A. Akerlof & William R. Dickens & George L. Perry, 1996. "The Macroeconomics of Low Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 1-76.
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