Unemployment–inflation trade-offs in OECD countries

Bhattarai, Keshab

doi:10.1016/j.econmod.2016.05.007

Cited by 50 publications

(53 citation statements)

References 49 publications

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“…Employers seize employment due to the high procurement costs and marginal cost involved causing unemployment to trade upwards. Results concur with Bhattarai (2016) in OECD countries for the period 1990q1-2014q4. The underlying unemployment level is relatively lower at 0.89 % than the average rate for the whole study period at 11.5%, an indication of the decreasing labor imperfections and fiscal policy feasibility.…”

Section: Results and Analysissupporting

confidence: 77%

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Trade-Off Phillips Curve, Inflation and Economic Implication: The Kenyan Case

Duncan¹,

Li²,

Ssali³

2019

IJEF

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This paper investigated the trade-off and inflation drivers based on the Phillips curve framework to determine the relationship and their impact between inflation, unemployment and output for Kenyan case from 2006:M1 to 2016:M12 by contrasting the 2SLS on 2 different measures of marginal cost with 3 differently instrumented shocks. Results confirmed; (1) significant trade-off that reduced inflation by 2.09% and 0.08% when unemployment and output respectively increase by 1%, while, 1% increase in output demeaned unemployment by 0.02%, (2) the forward-looking inflation and unemployment significantly drive observed inflation, and (3) unlike monetary supply, oil shocks best accounts for the observed dynamics. Although laudable policies been implemented by fiscal and macro-economic planners, they have not achieved the odds to sufficiently contain the import shocks, making both unemployment and the rational expectations to significantly drive the observed inflation. However, revisiting of the incumbent fiscal policies and their tight implementation would facilitate long term price stabilities to reduce the inflationary dynamics. To the significant import shocks, the state should foster feasible macro-economic diversifications, investments policies, modern technologies in real economic activity production, and renewable energy sourcing that would facilitate robust economic growth that would curb large revenue outflows due to commodity imports and cushioning the devaluation of the Kenyan shilling.

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Section: Results and Analysissupporting

confidence: 77%

“…In addition, the role played by the expectations in shaping inflation provides a substantial platform for the varied specifications of the curve which chains analysis and implicative effects of the resulting relationship. (Behera, Wahi, & Kapur, 2018;Bhattarai, 2016;Xu, Niu, Jiang, & Huang, 2015).…”

Section: Evolution Of the Phillips Curvementioning

confidence: 99%

Trade-Off Phillips Curve, Inflation and Economic Implication: The Kenyan Case

Duncan¹,

Li²,

Ssali³

2019

IJEF

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“…Bhattarai et. al [10] chose 28 OECD countries to examine the connection between inflation and unemployment for the period 1990:1-2014:4. The panel co-integration and panel granger causality tests were performed and the study showed varied findings whereby a significance of a negative connection between inflation and unemployment in some countries including Australia, Denmark, France, Italy, Netherlands, Spain, New Zealand, the UK and the US.…”

Section: Introductionmentioning

confidence: 99%

Empirical Analysis on The Existence of The Phillips Curve

Shaari¹,

Abdullah²,

Razali³

et al. 2018

MATEC Web of Conferences

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The Phillips curve shows the trade-off relationship between the inflation and unemployment rates. A rise in inflation due to the high economic growth, more jobs are available and therefore unemployment will fall. However, the existence of the Phillips curve in high-income countries has not been much discussed. Countries with high income should have low unemployment rate, suggesting a high inflation. However, some high-income countries, the United States in 1970s for example, could not avert stagflation whereby high unemployment rate and inflation occurred in the same time. This situation is contrary to the Phillips curve. Therefore, this study aims to investigate the existence of the Phillips curve in high-income countries for the period 1990-2014 using the panel data analysis. The most interesting finding of this study is the existence of a bidirectional relationship between unemployment rate and inflation rate in both long and short runs. Therefore, the governments should choose to stabilize inflation rate or reduce unemployment rate

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“…For most countries, the Phillips curve relation is indeed found to be negative. However, for Korea the relation is weak and not negative for all time periods (Bhattarai, 2016). One interpretation of this result is that the traditional measure of unemployment in Korea does not fully capture the degree of labor market slack.…”

mentioning

confidence: 90%

“…In Korea, traditional measures of labor market slack may not fully capture the cyclical conditions in the labor market. The Phillips curve relationship between inflation and unemployment is relatively weak (Bhattarai, 2016). This could reflect the fact that the traditional measure of unemployment does not truly reflect the full degree of labor market slack for the following two reasons.…”

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confidence: 99%

Labor Market Slack and the Output Gap

Hansen

Mongardini²,

Zhang³

2019

IMF Working Papers

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Output gap estimates are widely used to inform macroeconomic policy decisions, including in Korea. The main determinant of these estimates is the measure of labor market slack. The traditional measure of unemployment in Korea yields an incomplete estimate of labor market slack, given that many workers prefer involuntary part-time jobs or leaving the labor force rather than registering as unemployed. This paper discusses a way in which the measure of unemployment can be broadened to yield a more accurate measure of labor market slack. This broader measure is then used to estimate the output gap using a multivariate filter, yielding a more meaningful measure of the output gap.

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Unemployment–inflation trade-offs in OECD countries

Cited by 50 publications

References 49 publications

Trade-Off Phillips Curve, Inflation and Economic Implication: The Kenyan Case

Trade-Off Phillips Curve, Inflation and Economic Implication: The Kenyan Case

Empirical Analysis on The Existence of The Phillips Curve

Labor Market Slack and the Output Gap

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