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Impact of Fluctuations in Inflation Rate on unemployment in Algeria: A Svar Approach

Author

Listed:
  • Djamal Dekkiche

    (Tebessa University, Algeria)

  • Fairouz Cherayett

    (Oran Graduate School of Economics, Algeria)

Abstract

Subject and purpose of work This article aims to analyze the relationship between inflation rates (INF) and unemployment rates (UR) in the Algerian economy during the period 1970-2021 by studying the extent to which the unemployment rate responds to shocks and structural changes that occur at the level of the inflation rate. Materials and methods Use the structural VAR (SVAR) approach, based on RStudio output. Results The estimation results provide strong evidence in favor of the VAR (SVAR) approach. Conclusions The application of Impulse–Response Functions (IRFs) and analysis of variance (ANOVA) reveals that the occurrence of a structural shock in the inflation rate (INF) by one standard deviation leads to a positive effect on the unemployment rate (UNEM) at the beginning of the first period, and then it gradually decreases to become almost nonexistent. Therefore, the improvement in Consumer Price Index (CPI) leads to the absorption and reduction of unemployment rates (UR) to achieve stability and confirm the existence of the Phillips curve.

Suggested Citation

  • Djamal Dekkiche & Fairouz Cherayett, 2024. "Impact of Fluctuations in Inflation Rate on unemployment in Algeria: A Svar Approach," Economic and Regional Studies / Studia Ekonomiczne i Regionalne, Sciendo, vol. 17(4), pages 640-661.
    • Handle: RePEc:vrs:ecoreg:v:17:y:2024:i:4:p:640-661:n:1005
    DOI: 10.2478/ers-2024-0035
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    References listed on IDEAS

    as
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    3. Santomero, Anthony M & Seater, John J, 1978. "The Inflation-Unemployment Trade-off: A Critique of the Literature," Journal of Economic Literature, American Economic Association, vol. 16(2), pages 499-544, June.
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    7. Nurudeen Abu, 2019. "Inflation and Unemployment Trade-off: A Re-examination of the Phillips Curve and its Stability in Nigeria," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 13(1), March.
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    More about this item

    Keywords

    INF; UNEM; IRFs; SVAR model; Algerian economy;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General

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