Working Paper: CEPR ID: DP10567
Authors: Stefan Gerlach; Reamonn Lydon; Rebecca Stuart
Abstract: We study the determination of Irish inflation between 1926 and 2012. The difference between unemployment and the NAIRU is a significant determinant of inflation in a simple backward-looking Phillips Curve that incorporates import prices. While there is a break in 1979-80, when the link to Sterling was abandoned, this effect is present in the full sample and in the subsamples spanning 1926-1979 and 1980-2012. The econometric model assumes that the NAIRU follows a random walk.
Keywords: historical statistics; import prices; inflation; ireland; unemployment
JEL Codes: E3; E4; N14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| difference between unemployment and the NAIRU (J64) | inflation (E31) |
| unemployment (J64) | inflation (E31) |
| NAIRU (E24) | inflation (E31) |
| lagged unemployment rate (J64) | inflation (E31) |
| inflation (E31) | import prices (P22) |