Empirical evidence on alternative theories of inflation and unemployment: a re-evaluation for the Scandinavian countries

Abstract

The paper re-evaluates some inflation and unemployment models for the Scandinavian countries, utilizing a general to specific methodology. Two nested models are considered to represent a spectrum of unemployment and inflation models in order to examine the monetarist versus new classical unemployment debate, and the Keynesian versus monetarist inflation debate. Using an improved methodology and larger data set different results from those of Akkina and Varamini are obtained. In particular, for unemployment unequivocal support is found for the new classical model, but for inflation, the empirical results support the Keynesian model for Sweden, and reflect mixed results for Denmark, Finland and Norway.