Long-term unemployment can affect inflation – BoE paper
Non-linear Phillips curve helps explain finding that breaks with previous literature
Inflation forecasters may be able to improve their accuracy if they factor in the duration of unemployment, a paper published by the Bank of England finds.
Typically, economists have found it is short-term unemployment that affects wages and therefore inflation, with little identifiable effect from long-term unemployment. But BoE economists Vania Esady, Bradley Speigner and Boromeus Wanengkirtyo say previous research fails to control for non-linearities in the Phillips curve. The curve links
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