Unemployment has non-linear relationship to inflation – Fed paper
Authors say their findings could be relevant to debates over inflation targets
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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