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Inflation gifts restrictions for structural VARs: evidence from the US

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  • Andrea Vaona

    (Department of Economics (University of Verona))

Abstract

We investigate the link between inflation, growth and unemployment nesting a model of fair wages into one of endogenous growth of learning-by-doing. Firms protect real wages against inflation in exchange of worker's effort. In the long-run, unemployment decreases with higher inflation and real growth rates, though less so as inflation and growth increase. We then derive long-run restrictions for structural VARs for US data and we investigate the short-run behavior of inflation, real growth and unemployment. Structural shocks to inflation reduce unemployment and increase growth; to growth reduce unemployment and leave inflation unaffected; to unemployment produce a stagflation.

Suggested Citation

  • Andrea Vaona, 2015. "Inflation gifts restrictions for structural VARs: evidence from the US," Working Papers 16/2015, University of Verona, Department of Economics.
    • Handle: RePEc:ver:wpaper:16/2015
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    More about this item

    Keywords

    efficiency wages; money growth; long-run Phillips curve; SVARs;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

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