The existence of philips curve in the long run: some evidences from australian, south korean and indonesian economies

Author: 
Muchdie

This paper provides evidences on the existence of the Philips curve in an economy.The Philips curve depicted a negative correlation between the rate of inflation and unemployment rate. This dilemma has been a big problem faced by any government. Inflation cannot be eliminated without raising unemployment, at least for some time and moderate unemployment cannot be cut sharply without the risk of raising inflation. It was empirically evidence that this curve exist in the short-run. In the short run, inflation cannot be reduced without creating a recession. In the long run, many research proved that there was not any trade-off between inflation and unemployment. Data from Australia (1980-2015), South Korea (1980-2015) and Indonesia (1995-2015) have been used to provide evidence on the existence of Philips curve in the long run, using regression analysis. The results provide evidences that there were negative correlation between the rate of inflation and unemployment rate.It means that in the long run, the Philips curve do exist in the economy, even though the relationship between them was not statistically significant.

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