The failure of such models would be accompanied by a conclusion that real variables are driven by technology shocks, whereas inflation is explained by variations of markups, i.e. cost-push shocks. Such a conclusion is at odds with a tight positive comovement of output and inflation at cyclical frequencies.16 Further, investigating the Okun’s law in the euro area suggests that employment is also driven by a strong common demand factor that comoves with inflation. Okun’s law, see Okun (1962), posits a relationship between output and unemployment.