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Does the “Phillips Curve” Really Exist? New Empirical Evidence from Malaysia

  • Fumitaka Furuoka

    ()

    (UMS)

The hypothesized trade-off relationship between inflation rate and unemployment rate has been known as the “Phillips curve”. Though the Phillips curve has played an important role in the decision-making process on macroeconomic policy, there have been critics who doubted the existence of the “Phillips curve”. Despite a number of studies on the Phillips curve, there has been a lack of research that probed the hypothesis in the developing countries' context. This paper chooses Malaysia as a case study to empirically examine the relationship between inflation rate and unemployment rate. The most interesting finding of this paper is the existence of a long-run and trade-off relationship – and also causal relationship between the unemployment rate and the inflation rate in Malaysia. In other word, this paper has provided an empirical evidence to support the existence of the Phillips curve in the case of Malaysia.

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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 5 (2007)
Issue (Month): 16 ()
Pages: 1-14

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Handle: RePEc:ebl:ecbull:eb-07e20006
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  1. Jaan Masso & Karsten Staehr, 2005. "Inflation Dynamics And Nominal Adjustment In The Baltic States," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 35, Faculty of Economics and Business Administration, University of Tartu (Estonia).
  2. Guy Debelle & James Vickery, 1997. "Is the Phillips Curve a Curve? Some Evidence and Implications for Australia," RBA Research Discussion Papers rdp9706, Reserve Bank of Australia.
  3. DiNardo, J. & Moore, M.P., 1999. "The Phillips Curve is Back? Using Panel Data to Analyze the Relationship Between Unemployment and Inflation in an Open Economy," Papers 99-00-04, California Irvine - School of Social Sciences.
  4. Sawa, Takamitsu, 1978. "Information Criteria for Discriminating among Alternative Regression Models," Econometrica, Econometric Society, vol. 46(6), pages 1273-91, November.
  5. Robert A. Hart, 2003. "Overtime Working, The Phillips Curve And The Wage Curve: British Engineering, 1926-66," Manchester School, University of Manchester, vol. 71(2), pages 97-112, 03.
  6. Arratibel, Olga & Rodriguez-Palenzuela, Diego & Thimann, Christian, 2002. "Inflation dynamics and dual inflation in accession countries: a 'New Keynesian' perspective," Working Paper Series 0132, European Central Bank.
  7. Vincent Hogan, 1998. "Explaining the Recent Behavior of Inflation and Unemployment in the United States," IMF Working Papers 98/145, International Monetary Fund.
  8. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
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