Unemployment and Inflation Regimes

Arbeitspapier

In this paper we study 2-state Markov switching VAR models of monthly unemployment and inflation for three countries: Sweden, United Kingdom, and the United States. The primary purpose is to examine if periods of low inflation are associated with high or low unemployment volatility. We find that MS-VAR models seem to provide a better description of the data than single regime VARs and need fewer lags to account for serial correlation. To interpret the regimes the empirical results are compared with the predictions from a version of Rogoff's (1985) model of monetary policy. We find that both the theoretical and empirical results suggest that an increase in central bank conservativeness can be associated with either a higher or a lower variance in unemployment. In the U.S. case we find that the variance of unemployment is lower in the low inflation regime than in hte high inflation regime, while the Swedish and the U.K. cases suggest that unemployment variability is higher in the low inflation regime.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Sveriges Riksbank Working Paper Series ; No. 107

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Price Level; Inflation; Deflation ; Monetary Policy
• Thema: Cointegration ; Monetary policy ; Phillips curve ; Regime switching ; Unemployment volatility

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Vredin, Anders ; Warne, Anders
• Ereignis: Veröffentlichung
• (wer): Sveriges Riksbank
• (wo): Stockholm
• (wann): 2000

Weitere Informationen

• Handle: http://hdl.handle.net/10419/82471
• Letzte Aktualisierung: 10.03.2025, 11:45 MEZ