Unemployment has non-linear relationship to inflation – Fed paper

Federal Reserve

High inflation tends to be associated with high unemployment in the long run, and this relationship becomes stronger as inflation rises, a working paper published by the Federal Reserve finds.

Mohammed Ait Lahcen, Garth Baughman, Stanislav Rabinovich and Hugo van Buggenum build a model to explore what they call the well-established empirical result that unemployment has a positive relationship to inflation in the long run.

They confirm this long-run relationship and find that higher expected

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