Unemployment and Inflation in Ireland: 1926-2012
CFS Working Paper No. 514
34 Pages Posted: 22 Sep 2015
Date Written: July 30, 2015
Since the 1970s, the overarching view in the literature has been that a Phillips curve relationship did not exist in Ireland prior to the 1979 exchange rate break with Sterling. It was argued that, as a small open economy, prices were determined externally. To test this relationship, we study the determination of inflation between 1926 and 2012, a longer sample period than any previously used. We find that the difference between unemployment and the NAIRU is a significant determinant of inflation both in the full sample and in the subsamples spanning the periods before and after the Sterling parity link.
Keywords: Ireland, historical statistics, inflation, unemployment, import prices
JEL Classification: E3, E4, N14
Suggested Citation: Suggested Citation