Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
9548619 | Economic Modelling | 2005 | 33 Pages |
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
Authors
David G. Mayes, Matti Virén,