Asymmetry and the problem of aggregation in the euro area

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Title: Asymmetry and the problem of aggregation in the euro area
Author: Mayes, David G. ; Virén, Matti
Organization: Suomen Pankki
Series: Bank of Finland. Discussion papers
Series number: 11/2000
Year of publication: 2000
Publication date: 20.9.2000
Published in: Published in Economic Modelling, Vol. 22, No 2, March 2005: 219-251
Pages: 40 s.
Keywords: kansainvälinen; euroalue; työttömyys; inflaatio; rahapolitiikka; suhdanteet; Phillipsin käyrä; kansantaloustiede; Okunin käyrä
Abstract: This paper highlights the implications for EU macroeconomic policy at a relatively disaggregated level when key economic relationships are nonlinear or asymmetric.Using data for the EU and OECD countries we show that there are considerable non-linearities and asymmetries in the Phillips and Okun curves.High unemployment has a relatively limited effect in pulling inflation down while low unemployment can be much more effective in driving it up.Downturns in the economy are both more rapid and sustained in driving unemployment up than recoveries are in bringing it down.There is considerable variety in these relationships and in IS curves across not just countries but also sectors and regions. Key words: aggregation, asymmetry, monetary policy, nonlinear models, Okun curve, Phillips curve

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