DP10567 Unemployment and Inflation in Ireland: 1926-2012

Author(s): Stefan Gerlach, Reamonn Lydon, Rebecca Stuart
Publication Date: May 2015
Keyword(s): historical statistics, import prices, inflation, Ireland, unemployment
JEL(s): E3, E4, N14
Programme Areas: International Macroeconomics, Economic History
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=10567

We study the determination of Irish inflation between 1926 and 2012. The difference between unemployment and the NAIRU is a significant determinant of inflation in a simple backward-looking Phillips Curve that incorporates import prices. While there is a break in 1979-80, when the link to Sterling was abandoned, this effect is present in the full sample and in the subsamples spanning 1926-1979 and 1980-2012. The econometric model assumes that the NAIRU follows a random walk.