A Time Series Analysis of the Relationship between Inflation Uncertainty and Unemployment

This paper examines the empirical relationship between inflation uncertainty and unemployment rates. We find supportive evidence of a significant positive association between inflation uncertainty and unemployment, but this relationship depends critically on three factors. First, the inflation uncertainty-unemployment relationship is not significant before the mid-1970s. Second, the inflation uncertainty-unemployment relationship does not hold across all single digit SIC industries. And third, the inflation uncertainty-unemployment relationship is concentrated at business cycle and long-run components of the data, rather than high-frequency components.