DP10567 | Unemployment and Inflation in Ireland: 1926-2012

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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.