Long-term unemployment can affect inflation – BoE paper

Non-linear Phillips curve helps explain finding that breaks with previous literature

Bank of England blue sky

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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