A Study on the Relationship Between Inflation and Unemployment
DOI:
https://doi.org/10.61173/7tqsr768Keywords:
Phillips Curve, Macroeconomic Policy, Flattening RelationshipAbstract
The Phillips curve has long pointed out. Inflation and unemployment have a negative relationship. This study checks again. Does this idea work in the United States? The time is from 2000 to 2024. This time had financial crises, pandemics, and supply-side shocks. This study uses monthly inflation and unemployment data from the Bureau of Labor Statistics and the Federal Reserve Economic Database. This study uses an ordinary least squares (OLS) regression. It does this to check if there is a clear linear relationship between the variables people care about. It also does this to see if this relationship is statistically significant. The number that shows how unemployment affects inflation (regression coefficient) is 0.0024. Its p-value is 0.433. The R-squared is 0.001. The results show there is no statistically significant linear relationship between inflation and unemployment in the United States from 2000 to 2024. This challenges the traditional Phillips curve framework. It also suggests its ability to explain things in modern macroeconomics is limited.
References
[1] U.S. Bureau of Labor Statistics. (2022). Historical inflation rates (CPI). Retrieved from https://www.usinflationcalculator. com/inflation/historical-inflation-rates/
[2] Federal Reserve Bank of St. Louis. (2009). Unemployment rate [UNRATE]. Retrieved from https://fred.stlouisfed.org/ series/UNRATE
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[6] Phelps, E. S. (1968). Money-Wage Dynamics and Labor Market Equilibrium. Journal of Political Economy, 76(4), 678– 711.
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[9] Ball, L., & Mazumder, S. (2011). Inflation dynamics and the Great Recession. Brookings Papers on Economic Activity, 2011(1), 337– 405.
[10] Blanchard, O. (2016). The U.S. Phillips Curve: Back to the 60s? Peterson Institute for International Economics, Working Paper 16-1.
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