Inflation Uncertainty and Unemployment: Some International Evidence

Abstract

Thisresearch examined whether the uncertainty associated with the volatility of inflation impacted unemployment in the G7 countries over the last two decades.The results indicate that inflation vari ability had a significant short-run effect upon the unemployment rate in Canada, France, Italy, and the US while no effect was found for Germany, Japan, or the UK. However, consistent with economic the ory, we find no evidence of a long-run trade-off between inflation variability and unemployment.

Inflation – Unemployment Dilemma. A Cross-Country Analysis

“…Our findings support Phillips model on the short run, indicating that there is an inverse link between the inflation rate and the unemployment rate in the G7 states, during the analyzed period. These results are in line with the conclusions of other studies which showed that the Phillips curve relationship is present on short term (Seyfried & Ewing, 2001), foreign factors playing an important role in influencing the inflation even in relatively large economies, such as the G7 countries (Baxa et al, 2017). However, on the long run, our results indicate that inflation and unemployment can coexist, fact that allows us to agree with the monetarist theories.…”

Growth under exchange rate volatility: Does access to foreign or domestic equity markets matter?

“…Besides, banking crises in emerging markets are often accompanied by currency crises (Beck et al, 2003). (Seyfried and Ewing, 2001), and growth (Grier and Grier, 2006); e) raising interest rates (UNCTAD, 2006) with negative growth effects (Nickell and Nicolitsas, 1999); f) damaging firm balance sheets and net worth (Bernanke and Gertler, 1990;Braun and Larrain, 2005); and g) discouraging international trade by raising transaction risk (Grier and Smallwood, 2007).…”

Exchange Rate Volatility and Employment Growth in Developing Countries: Evidence from Turkey

“…It can also: a) raise inflation uncertainty (UNCTAD, 2006) that is shown to reduce employment (Seyfried and Ewing, 2001) and growth (Grier and Grier, 2006); b) encourage short term financial investments at the expense of long term fixed investments by real sector firms (UNCTAD, 2006;Demir, 2009aDemir, , 2009b; c) damage firms' balance sheets and reduce their net worth (especially when firms suffer from currency and maturity mismatch problems) that limit the amount of credit they can get, aggravating the initial shock (Bernanke and Gertler, 1990;Krugman, 1999;Braun and Larrain, 2005); d) reduce economic growth with negative effects on employment (Pindyck and Solimano, 1993;Ramey and Ramey, 1995); e) discourage international trade (assuming riskaverse investors) by raising the risk in international transactions (Kenen and Rodrik, 1986;Thursby and Thursby, 1987;Qian and Varangis 1994). The negative effect is expected to be more pronounced when the exports are invoiced in the importers' currency, as is the case for most developing countries (Qian and Varangis, 1994; also see Grier and Smallwood, 2007).…”