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Discussion Paper

No. 2007-34 | August 03, 2007
Monetary Policy and Swedish Unemployment Fluctuations

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.

JEL Classification

E24 J60

Cite As

Annika Alexius and Bertil Holmlund (2007). Monetary Policy and Swedish Unemployment Fluctuations. Economics Discussion Papers, No 2007-34, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2007-34

Assessment



Comments and Questions


Anonymous - Referee Report
September 25, 2007 - 15:03

see attached file


Bertil Holmlund - Response to Referee Reports
October 18, 2007 - 11:15

see attached file


Bertil Holmlund - Revised Version
October 18, 2007 - 11:17

see attached file