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13 Int'l Lab. Rev. 785 (1926)
A Statistical Relation between Unemployment and Price Changes

handle is hein.journals/intlr13 and id is 789 raw text is: INTERNATIONAL LABOUR REVIEW
VOL. XIII. No. 6                                      JUNE 1926
A Statistical Relation between
Unemployment and Price Changes
Professor Irving FISHER,
Professor of Economics, Yale University
The possible relation between changes in the price level and changes
in the volume of employment, much discussed by economists at the
present time, has already been debated in the pages of the Review.
In the present article Professor Fisher, one of the foremost authorities
on monetary problems and for years a protagonist of stabilisation,
removes the question from the sphere of controversy to that of exact
statistical research.  He has found a remarkably high correlation
between the rate of price changes and employment, and he describes
the methods by which he has achieved this result. The data used refer
exclusively to the United States, and further research would be required
before the conclusions could be applied directly to other countries.
Nevertheless, this objective statistical confirmation of a relation long
asserted to exist is a highly important step in advance.
N a matter as intensely human as the employment problem it
seems a far cry from money and banking to an explanation of
why working men are thrown out of jobs. And yet, in the signifi-
cant period 1915-1925, analysis shows a Pearsonian correlation
as high as 90 per cent. between the rate of change in the value of
the dollar and unemployment in the United States.
The fact that deflation causes unemployment has been well
recognised for many years in isolated instances, such as the great
deflation of 1921 in America or the corresponding post-war
deflation in Great Britain, Czechoslovakia, or Norway. It has
likewise been recognised that inflation carries with it a great
stimulation to trade and an increase in employment (or decrease
in unemployment). And yet, strange as it may seem, when applied
to the so-called  business cycle , these relationships have been
almost wholly overlooked. When, for instance, Mr. Hoover had
his committee of experts study unemployment and make a report
to him three years ago, almost every other factor that might

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