Money and the Natural Rate of Unemployment by Finn Ostrup

By Finn Ostrup

This publication provides a revisionist view of financial coverage and fiscal regimes. It offers numerous new mechanisms, indicating that money impacts long term creation. the ensuing coverage implications also are mentioned, together with: the makes use of of economic coverage and financial regimes achieve macroeconomic pursuits; the effect of an self reliant significant financial institution; the consequences of a move from floating trade charges to fastened trade premiums in a financial union. as well as the theoretical and coverage discussions the publication additionally incorporates a finished survey of the present country of scholarship during this quarter.

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Extra resources for Money and the Natural Rate of Unemployment

Sample text

Testing the seven largest OECD countries, Weber (1994) likewise ®nds a negative long-run relationship between unemployment and in¯ation but cannot reject the hypothesis of a vertical long-term Phillips curve. Several studies support the view that in¯ation uncertainty affects the real economy. Evans and Wachtel (1993) ®nd evidence that uncertainty about the monetary regime increases unemployment. Huizinga (1993) concludes that uncertainty concerning in¯ation is correlated with uncertainty about real variables, that is, the real wage, real output prices, and pro®t rates.

Until recent years, the studies mostly indicated a negative relationship between in¯ation and economic growth. 4 percentage points. Similar results are derived by Barro (1995) and by de Gregorio (1993). Examining 24 OECD countries over the 1960±91 period, AndreÂs, DomeÂnech, and Molinas (1996) ®nd output growth to be negatively correlated with in¯ation and positively correlated with money supply growth. If the money supply growth is deleted as an explanatory variable, in¯ation becomes insigni®cant.

The wage formation process 43 optimisation or, in the case of stochastic variables, the stochastic distributions of these variables.

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