Unemployment-inflation trade-offs in OECD countries

Bhattarai, Keshab

Abstract

© 2016 The Author. Inflation and unemployment reduce welfare of individuals and should be as low as possible in any economy. Cointegration and Granger causality tests suggest that there are long run relations between these two variables among the OECD economies. While rates of unemployment vary significantly among these economies, rates of inflation have stabilised at lower rates as a result of inflation targeting policies adopted in them during the last two decades. The Phillips curve phenomena are still empirically significant for 28 out of 35 of these OECD economies in country specific regressions; in fixed and random effect panel data models and in a panel VAR model for 1990:1 to 2014:4. Country specific supply curves and Okun curves are consistent to thin Phillips curve relations. Leftward shifts in the Beveridge and Phillips curves require labour market reforms balancing between job creations and destructions. Complementing macro stimulations by microeconomic structural and institutional reforms can bring efficiency in bargaining for wages and employment among firms and workers to make unemployment-inflation trade-offs more significant and relevant in these economies.

Citation

Bhattarai, K. (2016). Unemployment-inflation trade-offs in OECD countries. Economic modelling, 58, 93-103. https://doi.org/10.1016/j.econmod.2016.05.007

• Journal Article Type: Article
• Acceptance Date: May 6, 2016
• Online Publication Date: Jun 2, 2016
• Publication Date: Nov 1, 2016
• Deposit Date: May 13, 2016
• Publicly Available Date: Jun 2, 2016
• Journal: Economic modelling
• Print ISSN: 0264-9993
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 58
• Pages: 93-103
• DOI: https://doi.org/10.1016/j.econmod.2016.05.007
• Keywords: Economics and Econometrics
• Public URL: https://hull-repository.worktribe.com/output/438109
• Publisher URL: http://www.sciencedirect.com/science/article/pii/S0264999316301298
• Additional Information: This article is maintained by: Elsevier; Article Title: Unemployment–inflation trade-offs in OECD countries; Journal Title: Economic Modelling; CrossRef DOI link to publisher maintained version: http://dx.doi.org/10.1016/j.econmod.2016.05.007; Content Type: article; Copyright: © 2016 The Author. Published by Elsevier B.V.