Inflation volatility and unemployment in industrial countries
Using annual data on 20 industrial countries over the period from 1972 to 2003, this article analyses the impact of inflation volatility on unemployment. It finds that higher volatility over the previous 10 years is associated with a higher unemployment rate in the current year. The effect appears to be small in the short run and medium sized in the long run. The results are robust to variations in specification and sample size. The magnitude of the effect is not smaller if the sample is limited to the more recent sub-period of comparatively low inflation volatility.
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Document Type: Research Article
Affiliations: Department of Economics,University of Bath, Bath BA2 7AY, UK
Publication date: 2012-01-01