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Econometric Analysis of the Modified Phillips Curve in Finland 1988–2009

Author

Listed:
  • Teodor Sedlarski

    (Faculty of Economics and Business Administration, Sofia University St Kliment Ohridski)

  • Angel Eremiev

    (Faculty of Economics and Business Administration, Sofia University St Kliment Ohridski)

Abstract

In this article we apply basic econometric tools to examine the inverse relationship between unemployment and inflation rates known as the Phillips curve. The object of our study is the Finnish economy in the period 1988–2009. We introduce and analyse two regression models, linear and reciprocal, to estimate the level of correlation between both variables. As the reciprocal model yields better results we test hypotheses about its coefficients. The interpretation of the findings about Finland is supportive of the traditional trade-off implied by the Phillips curve between unemployment and inflation rates.

Suggested Citation

  • Teodor Sedlarski & Angel Eremiev, 2013. "Econometric Analysis of the Modified Phillips Curve in Finland 1988–2009," Yearbook of the Faculty of Economics and Business Administration, Sofia University, Faculty of Economics and Business Administration, Sofia University St Kliment Ohridski - Bulgaria, vol. 11(1), pages 227-251, March.
    • Handle: RePEc:sko:yrbook:v:11:y:2013:i:1:p:227-251
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    More about this item

    Keywords

    Phillips curve; unemployment; inflation; wages; NAIRU;
    All these keywords.

    JEL classification:

    • B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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