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Unemployment and Inflation in the Philippines: New Evidence from Vector Error Correction Model

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  • Furuoka, Fumitaka

Abstract

This article empirically analyzes the relationship between unemployment rate and inflation rate in the Philippines over the period 1980-2006. The negative association between unemployment and inflation is known as the Phillips Curve because the trade-off relationship between these two variables was first pointed out by William Phillips in 1958. Since then, the Phillips Curve has remained an important foundation for macroeconomic management in various countries. The main finding of this study is that there exists a cointegrating relationship--but no causal relationship--between unemployment rate and inflation rate in the Philippines.

Suggested Citation

  • Furuoka, Fumitaka, 2009. "Unemployment and Inflation in the Philippines: New Evidence from Vector Error Correction Model," Philippine Journal of Development PJD 2008 Vol. XXXV No. 1-, Philippine Institute for Development Studies.
    • Handle: RePEc:phd:pjdevt:pjd_2008_vol__xxxv_no__1-d
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    File URL: https://www.pids.gov.ph/publication/philippine-journal-of-development/unemployment-and-inflation-in-the-philippines-new-evidence-from-vector-error-correction-model
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    References listed on IDEAS

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    1. Dave Turner & Elena Seghezza, 1999. "Testing for a Common OECD Phillips Curve," OECD Economics Department Working Papers 219, OECD Publishing.
    2. Mr. Vincent Hogan, 1998. "Explaining the Recent Behavior of Inflation and Unemployment in the United States," IMF Working Papers 1998/145, International Monetary Fund.
    3. Guy Debelle & James Vickery, 1998. "Is the Phillips Curve A Curve? Some Evidence and Implications for Australia," The Economic Record, The Economic Society of Australia, vol. 74(227), pages 384-398, December.
    4. 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.
    5. A. W. Phillips, 1958. "The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861–1957," Economica, London School of Economics and Political Science, vol. 25(100), pages 283-299, November.
    6. Rodriguez-Palenzuela, Diego & Thimann, Christian & Backé, Peter, 2002. "Inflation dynamics and dual inflation in accession countries: a 'New Keynesian' perspective," Working Paper Series 132, European Central Bank.
    7. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
    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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    Cited by:

    1. Gatot Sasongko & Andrian Dolfriandra Huruta & Yudith Natalia Vebryanska Gultom, 2019. "Does the Phillips Curve exist in Indonesia? A Panel Granger Causality Model," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 6(3), pages 1428-1443, March.

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