Kiel Working Papers, Kiel Institute for World Economics
No 1329:
Monetary Policy and Swedish Unemployment Fluctuations
Annika Alexius and Bertil Holmlund
Abstract: A widely spread belief among economists is that monetary
policy has relatively short-lived effects on real variables such as
unemployment. Previous studies indicate that monetary policy affects the
output gap only at business cycle frequencies, but the effects on
unemployment may well be more persistent in countries with highly regulated
labor markets. We study the Swedish experience of unemployment and monetary
policy. Using a structural VAR we find that around 30 percent of the
fluctuations in unemployment are caused by shocks to monetary policy. The
effects are also quite persistent. In the preferred model, almost 30
percent of the maximum effect of a shock still remains after ten years.
Keywords: Unemployment, Monetary policy, structural VARs; (follow links to similar papers)
JEL-Codes: J60,; E24; (follow links to similar papers)
27 pages, June 2007
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