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The Costs of Inflation and Unemployment in Australia

Author

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  • Alex Joiner

    (School of Economics, La Trobe University)

Abstract

This paper examines the costs of inflation and unemployment encountered in the post-war Australian economy. The analysis takes place under the assumption that a trade-off between inflation and unemployment has persisted over this period. The methodology encompasses estimates of Okuns coefficient and the sacrifice ratio, over varying time horizons, in order to examine the effect that each has on output. When compared, the evidence strongly suggests that, in terms of output lost, unemployment imposes a greater and more conspicuous cost to the economy than does inflation.

Suggested Citation

  • Alex Joiner, 2000. "The Costs of Inflation and Unemployment in Australia," Working Papers 2000.05, School of Economics, La Trobe University.
    • Handle: RePEc:trb:wpaper:2000.05
    as

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    File URL: http://www.latrobe.edu.au/__data/assets/pdf_file/0018/130860/2000.05.pdf
    File Function: First version, 2000.05.pdf
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    References listed on IDEAS

    as
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    2. Jeff Borland & Steven Kennedy, 1998. "Dimensions, Structure and History of Australian Unemployment," RBA Annual Conference Volume (Discontinued), in: Guy Debelle & Jeff Borland (ed.),Unemployment and the Australian Labour Market, Reserve Bank of Australia.
    3. Weber, Christian E, 1995. "Cyclical Output, Cyclical Unemployment, and Okun's Coefficient: A New Approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(4), pages 433-445, Oct.-Dec..
    4. Stanley Fischer & Franco Modigliani, 1978. "Towards an understanding of the real effects and costs of inflation," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 114(4), pages 810-833, December.
    5. A. W. Phillips, 1958. "The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861–1957," Economica, London School of Economics and Political Science, vol. 25(100), pages 283-299, November.
    6. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    7. Don Harding & Adrian Pagan, 1999. "Knowing the Cycle," Melbourne Institute Working Paper Series wp1999n12, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    8. Koenker, Roger, 1981. "A note on studentizing a test for heteroscedasticity," Journal of Econometrics, Elsevier, vol. 17(1), pages 107-112, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Unemployment; Inflation; Trade;
    All these keywords.

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