Article ID: | iaor20021484 |
Country: | Netherlands |
Volume: | 17 |
Issue: | 3 |
Start Page Number: | 447 |
End Page Number: | 458 |
Publication Date: | Jul 2001 |
Journal: | International Journal of Forecasting |
Authors: | Guha Debashis, Visviki Dimitra |
Keywords: | inflation, employment |
An empirical investigation of postwar US data reveals that movements in inflation are much more strongly associated with job growth than the unemployment rate. Job growth is found to be strongly related to inflation even after accounting for the effect of the unemployment rate. The residual influence of the unemployment rate on inflation is small, however, after accounting for the effect of job growth. The data show that in the past inflation has tended to decline when job growth is weak even if unemployment is low. This suggests that the relatively slow job growth of recent years may partly explain the puzzle that, during much of the current expansion, the US economy has experienced little inflation in spite of low unemployment.