The Cost of Inflation and Unemplyement in Australia.

This paper examines the costs of inflation and unemployment encountered in the post-war Australian economy. The analysis takes place under the assumption that a trade-off between inflation and unemployment has persisted over this period. The methodology encompasses estimates of Okun's coefficient and the sacrifice ratio, over varying time horizons, in order to examine the effect that each has on output. When compared, the evidence strongly suggests that, in terms of output lost, enemployment imposes a greater and more conspicuous cost to the economy than does inflation.UNEMPLOYMENT ; INFLATION ; TRADE