Nonlinear unemployment effects of the inflation tax

Lahcen, Mohammed Aït; Baughman, Garth; Rabinovich, Stanislav; Buggenum, Hugo van

doi:10.1016/j.euroecorev.2022.104247

Cited by 3 publications

(4 citation statements)

References 34 publications

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“…Upon our result, a 1% increase in unemployment will cause inflation to rise by 3.6482% within the WAMZ. This no trade-off between inflation and unemployment aligns with the findings [11,39,12,29,35,32,46,4].…”

Section: Panel Autoregressive Distributed Lag Modelsupporting

confidence: 87%

Testing the Validity of the Inflation-Unemployment Nexus within the West African Monetary Zone

Effiong

Akpan2

Ekpe

2022

PoS

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This study aimed to ascertain the validity of the Phillips Curve in six countries of Gambia, Ghana, Guinea, Liberia, Nigeria, and Sierra Leone within the West African Monetary Zone (WAMZ). The study utilised panel data from these countries varying from 2000 to 2021, which were obtained from the World Bank database. The data were analysed using the Panel unit root test, Johansen Fisher Panel (JFP) co-integration test, Pairwise Dumitrescu Hurlin Panel (PDHP) Causality Tests, and the Panel Autoregressive Distributed Lag (ARDL) approach. The PDHP Causality Test revealed a one-way causality from unemployment to inflation; hence, unemployment causes inflation. The JFP co-integration test conducted since the variables were not all stationary at levels revealed that the two variables are cointegrated, which portrayed some degree of long-run relationship. The significant findings of this study, as presented by the panel ARDL result, indicated that the inverse relationship between inflation and unemployment is only valid in the short run within the WAMZ. This finding supports the argument that there is no trade-off between inflation and unemployment in the long run and the Phillips Curve is a vertical line at the natural unemployment rate.

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Section: Panel Autoregressive Distributed Lag Modelsupporting

confidence: 87%

Testing the Validity of the Inflation-Unemployment Nexus within the West African Monetary Zone

Effiong

Akpan2

Ekpe

2022

PoS

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“…Figure 7 depicts conditional GIRFs for three different levels of trend inflation. A higher trend inflation rate, through a higher opportunity cost of holding money, reduces the fundamental surplus fraction which increases the reaction of unemployment to shocks as discussed in Ait Lahcen et al (2022). This effect is strongest for Blacks' unemployment rate where the reaction to the shock under high trend inflation is on average 0.72pp higher than the reaction under low trend inflation.…”

Section: Inflation Tax and The Racial Unemployment Gapmentioning

confidence: 98%

“…Among others, Gomis-Porqueras et al (2013), Rocheteau and Rodriguez-Lopez (2014), Bethune et al (2015), Bethune and Rocheteau (2017), Dong and Xiao (2019), Ait Lahcen (2020), Gomis-Porqueras et al (2020), He and Zhang (2020), Jung and Pyun (2020), Gu et al (2021), andGabrovski et al (2023) have further investigated this long-run relationship. We employed the framework of Berentsen et al (2011) in related work (Ait Lahcen et al, 2022) in order to study the effects of trend inflation on the cyclical behavior of unemployment and output. In the current paper, we build on our previous work to study how the cyclical behavior of the racial unemployment gap depends on trend inflation.…”

Section: Relationship To Literaturementioning

confidence: 99%

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Racial Unemployment Gaps and the Disparate Impact of the Inflation Tax

2023

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The Asymmetric Effects of Unemployment and Output on Inflation in Greece: A Nonlinear ARDL Approach

Pegkas

2024

Economies

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This study examines the asymmetrical effects of unemployment and output on inflation in Greece. It applies a nonlinear autoregressive distributed lag model to focus on how positive and negative economic indicator fluctuations impact inflation. The empirical findings indicate an asymmetric and inverse relationship between inflation and unemployment. In the long run, positive shocks to unemployment affect inflation with greater intensity than negative shocks. The short-run trade-off between unemployment and inflation demonstrates linearity, with inflation showing greater sensitivity and a tendency to increase more during periods of economic expansion. Additionally, we find a nonlinear and positive relationship between inflation and output in both the long and short run. In the long run, negative output shocks have a more significant impact on inflation than positive shocks, while in the short run the results are reversed. These findings suggest that policymakers should carefully consider the nonlinearities of the Phillips curve to avoid policy errors in macroeconomic models.

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Nonlinear unemployment effects of the inflation tax

Cited by 3 publications

References 34 publications

Testing the Validity of the Inflation-Unemployment Nexus within the West African Monetary Zone

Testing the Validity of the Inflation-Unemployment Nexus within the West African Monetary Zone

Racial Unemployment Gaps and the Disparate Impact of the Inflation Tax

The Asymmetric Effects of Unemployment and Output on Inflation in Greece: A Nonlinear ARDL Approach

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