A note on unemployment rates and the paper-bill spread

Abstract

This paper reports a significant causal relationship from the paper-bill spread to the civilian unemployment rate even after accounting for the importance of output growth in explaining the unemployment rate. However, this relationship apparently vanished in the 1970s. Adding the paper-bill spread to the unemployment rate autoregression causes three key nominal variables, money growth, inflation, and a detrended interest rate to become jointly insignificant in all samples which include the 1980s.