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Phillips curve inflation and unemployment: an empirical research for Greece

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  • Chaido Dritsaki
  • Melina Dritsaki

Abstract

The relationship between inflation and unemployment was first introduced in 1958 by Phillips who found a negative relationship between unemployment and money wage growth in the UK. However, this relationship appeared to become unstable in many countries over the 1970s. This paper investigates the relationship between inflation and unemployment in Greece using annual data from 1980 until 2010. To examine the long-run relationship for the case of Greece we use the cointegration test applying the Johansen (1988) maximum likelihood procedure while Granger causality test is obtained by the vector autoregression (VAR). The results show that there is a long-run and causal relationship between inflation and unemployment for the aforementioned period. Finally, the impulse responses applied for the 10-year forecasting, suggest that shocks in inflation rate cause a reduction on unemployment index for the first years, following by a slight rise for the remaining years under examination.

Suggested Citation

  • Chaido Dritsaki & Melina Dritsaki, 2013. "Phillips curve inflation and unemployment: an empirical research for Greece," International Journal of Computational Economics and Econometrics, Inderscience Enterprises Ltd, vol. 3(1/2), pages 27-42.
    • Handle: RePEc:ids:ijcome:v:3:y:2013:i:1/2:p:27-42
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    1. repec:ocp:rpaper:pp-1722 is not listed on IDEAS
    2. repec:ocp:rpaeco:pp_17-22 is not listed on IDEAS
    3. ALIASUDDIN & Sofyan SYAHNUR & MALIA, 2020. "Inflation And Unemployment In Southeast Asian Countries: A Panel Gmm Application On Phillips Curve," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 145-152, June.
    4. Johanna Pangeiko Nautwima & Asa Romeo Asa, 2021. "The Relationship Between Inflation and Unemployment in Namibia Within the Framework of the Phillips Curve," International Journal of Innovation and Economic Development, Inovatus Services Ltd., vol. 7(5), pages 7-16, December.
    5. Fasanya, Ismail O. & Awodimila, Crystal P., 2020. "Are commodity prices good predictors of inflation? The African perspective," Resources Policy, Elsevier, vol. 69(C).
    6. Andrea Vaona, 2015. "Anomalous empirical evidence on money long-run super-neutrality and the vertical long-run Phillips curve," Working Papers 17/2015, University of Verona, Department of Economics.
    7. Derek Zweig, 2020. "Market Power, NAIRU, and the Phillips Curve," Abstract and Applied Analysis, Hindawi, vol. 2020, pages 1-18, December.

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