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The South Asian Phillips Curve: Assessing the Gordon Triangle

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  • Subhani, Muhammad Imtiaz
  • Osman, Amber

Abstract

One of the key drivers for the policy makers is the tie-up between price inflation and unemployment. In relevance to the economic theories in yester years, Phillips Curve has witnessed negative relationship between inflation and unemployment in many economies. This has an implication that if government seeks to reduce the unemployment then the inflation goes up means if it wants to relish the lower unemployment then it has to bear the burden and consequences of inflation. This paper in distinction investigates the Phillips Curve in connection with the Gordon Triangle for the South Asian Countries i.e. Pakistan, India, Bangladesh and Sri Lanka. The systematic investigation is based on historical thirty years of the rates of inflation and unemployment for the countries outlined. The split analysis of each country highlights the relationship between inflation and unemployment, which is positive for Pakistan and negative for Bangladesh, while no relationship has been observed between the two variables (no Phillips curve) for India and Sri Lanka. The negative impact of unemployment on inflation is actually the confirmation of Phillips Curve, which is indentified for Bangladesh while the positive association between the unemployment and inflation (Stagflation) is also observed, which is the confirmation of Gordon triangle empirically observed and identified for Pakistan.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 34734.

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Date of creation: 2011
Date of revision: 2011
Handle: RePEc:pra:mprapa:34734

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Keywords: Inflation; Unemployment; Phillips Curve; Gordon Triangle;

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  1. Milton Friedman & Anna Jacobson Schwartz, 1970. "Introduction to "Monetary Statistics of the United States: Estimates, Sources, Methods"," NBER Chapters, in: Monetary Statistics of the United States: Estimates, Sources, Methods, pages 1-86 National Bureau of Economic Research, Inc.
  2. John M. Roberts, 1994. "Is inflation sticky?," Working Paper Series / Economic Activity Section 152, Board of Governors of the Federal Reserve System (U.S.).
  3. Snower, Dennis J. & Karanassou, Marika, 2002. "An Anatomy of the Phillips Curve," IZA Discussion Papers 635, Institute for the Study of Labor (IZA).
  4. Milton Friedman & Anna Jacobson Schwartz, 1970. "Monetary Statistics of the United States: Estimates, Sources, Methods," NBER Books, National Bureau of Economic Research, Inc, number frie70-1, October.
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