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Empirical evidence on inflation and unemployment in the long run

  • Haug, Alfred A.
  • King, Ian P.

We examine the relationship between inflation and unemployment in the long run, using quarterly US data from 1952 to 2010. Using a band-pass filter approach, we find strong evidence that a positive relationship exists, where inflation leads unemployment by some 3 to 3 1/2 years, in cycles that last from 8 to 25 or 50 years. Our statistical approach is atheoretical in nature, but provides evidence in accordance with the predictions of Friedman (1977) and the recent New Monetarist model of Berentsen, Menzio, and Wright (2011): the relationship between inflation and unemployment is positive in the long run.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 33409.

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Date of creation: 25 Aug 2011
Date of revision:
Handle: RePEc:pra:mprapa:33409
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