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Andrea Vaona
''The Classical Dichotomy fails in the Eurozone''
( 2016, Vol. 36 No.4 )
By means of structural VARs we investigate the long-run nexus between inflation and output in the Eurozone under different identification schemes and model specifications. The Eurozone is an interesting case study due to its very low inflation rate and to the official adherence of its monetary authority to the classical dichotomy. We find a strong positive long-run connection between inflation and output, supporting recent theoretical models arguing that this might exist at low long-run inflation rates.
Keywords: long-run, non-vertical Phillips curve, empirical evidence
JEL: E3 - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)
E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit: General
Manuscript Received : Jul 14 2015 Manuscript Accepted : Nov 26 2016

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