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Phillips Curve in a Small Open Economy: A Time Series Exploration of North Cyprus

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  • Shahbaz, Muhammad

    (Research Fellow, Centre for Research, Department of Management Sciences, COMSATS Institute of Information Technology, Lahore , Pakistan)

  • Islam , Faridul

    (Department of Economics, Morgan State University, B altimore, MD, USA)

  • Shabbir, Muhammad Shahbaz

    (Head, Centre for Research, Department of Management Sciences, COMSATS Institute of Information Technology, Lahore, Pakistan)

Abstract

The paper explores the existence and the stability of the Phillips curve using time series data for North Cyprus, a small developing economy. ADF unit root test is employed to check for stationarity. ARDL and DOLS approaches to cointegration are used to explore the long run relation and ECM to understand short run dynamics. The predictive properties DOLS are better than those of the conventional methods. The estimates point to the existence of Phillips curve both in the long and the short run. CUSUM and CUSUMsq tests confirm the stable relation.

Suggested Citation

  • Shahbaz, Muhammad & Islam , Faridul & Shabbir, Muhammad Shahbaz, 2012. "Phillips Curve in a Small Open Economy: A Time Series Exploration of North Cyprus," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 35(4), pages 113-130, December.
    • Handle: RePEc:ris:badest:0548
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    More about this item

    Keywords

    Inflation; Unemployment; ADF; Cointegration; DOLS;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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