Article ID Journal Published Year Pages File Type
9548619 Economic Modelling 2005 33 Pages PDF
Abstract
This paper highlights implications for a single monetary policy when key economic relationships are non-linear or asymmetric at a disaggregate level. Using a four equation model with data for the EU countries we find considerable non-linearities and asymmetries in the Phillips and Okun curves. High unemployment has relatively limited effect in pulling inflation down while low unemployment can be much more effective in driving it up. Economic downturns 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 IS curves across countries, sectors and regions. Monetary policy reacts more vigorously outside a central corridor.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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