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Oreste Napolitano and Alberto Montagnoli
''The European Unemployment Gap and the Role of Monetary Policy ''
( 2010, Vol. 30 No.2 )
This study will shed some light on the debate on the impact of monetary policy on the labour market in Europe. The Phillips curve implies that demand-induced changes in inflation tend to lag behind movements in the unemployment rate, which means that a comparison between the actual unemployment rate and the NAIRU may be helpful in forecasting future changes in inflation. By using an unobserved component model with a Kalman filter we estimate the NAIRU for three countries in the euro area. Moreover, using a Markov switching model we investigate whether European monetary policy is responsible for these unemployment gaps and whether the interest rate is transmitted asymmetrically across countries
Keywords: Monetary Policy, Unemployment Gap, Markov Switching Model
JEL: E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit: General
Manuscript Received : Jan 10 2010 Manuscript Accepted : May 12 2010

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