A Long-Run Approach to Money, Unemployment, and Equity Prices

32 Pages Posted: 28 Jan 2022 Publication Status: Submitted

See all articles by Kuk Mo Jung

Kuk Mo Jung

Sogang University

Ju Hyun Pyun

Korea University Business School (KUBS)


This study documents robust empirical evidence that a significant joint relationship between the long-term trends of inflation, unemployment, and equity prices exists in the post-WWII U.S. data: (i) a positive relationship between inflation and unemployment; (ii) a negative relationship between unemployment and equity prices; and (iii) a negative relationship between inflation and equity prices. Then, we provide a microfounded framework to account for the evidence. The calibration exercises show that the model results driven solely by US monetary policy can account for 62.9% and 29.8% of variations of the long-term trends of US unemployment rate and real equity prices, respectively.

Keywords: Inflation, Unemployment, Equity Prices, Search Models

Suggested Citation

Jung, Kuk Mo and Pyun, Ju Hyun, A Long-Run Approach to Money, Unemployment, and Equity Prices. Available at SSRN: https://ssrn.com/abstract=4019945 or http://dx.doi.org/10.2139/ssrn.4019945

Kuk Mo Jung

Sogang University ( email )

Seoul 121-742
Korea, Republic of (South Korea)

Ju Hyun Pyun (Contact Author)

Korea University Business School (KUBS) ( email )

145 Anam-Ro, Seongbuk-Gu
Seoul, 02841
Korea, Republic of (South Korea)
82-2-3290-2610 (Phone)

HOME PAGE: http://sites.google.com/site/juhyunpyun/research

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