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Phillips Curve in Pakistan: A Graphical and Empirical Analysis

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  • Waheed, Irtiza Imran

Abstract

This study estimates the Phillips curve for Pakistan using time series data for unemployment and CPI for the years 1972 to 2018. In addition to empirical analysis extensive graphical analysis is conducted to get a better insight of the behavior of the Phillips curve. By dividing the sample size into periods of four decades and 2 equal halves the trend line is plotted for different periods which experience a shift as well as change in slope over time. The unit root tests proved the data to be stationary at level so OLS is used to run 3 different regressions. Since the data for unemployment contains a lot of repeated values which is problematic for post-regression analysis so output gap is also used as a proxy for unemployment. The empirical analysis is in accordance to the graphical analysis which shows a negative relationship between unemployment and inflation.

Suggested Citation

  • Waheed, Irtiza Imran, 2020. "Phillips Curve in Pakistan: A Graphical and Empirical Analysis," MPRA Paper 119097, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:119097
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    References listed on IDEAS

    as
    1. Muhammad Farooq Arby & Amjad Ali, 2017. "Threshold Inflation in Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 13, pages 1-19.
    2. Subhani, Muhammad Imtiaz & Osman, Amber, 2011. "The South Asian Phillips Curve: Assessing the Gordon Triangle," MPRA Paper 34734, University Library of Munich, Germany, revised 2011.
    3. Muhammad Afzal & Samia Awais, 2012. "Inflation-Unemployment Trade Off: Evidence from Pakistan," Journal of Global Economy, Research Centre for Social Sciences,Mumbai, India, vol. 8(1), pages 21-32, March.
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    5. Douglas O. Staiger & James H. Stock & Mark W. Watson, 1997. "How Precise Are Estimates of the Natural Rate of Unemployment?," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 195-246, National Bureau of Economic Research, Inc.
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    7. Bernanke, Ben S, 1995. "The Macroeconomics of the Great Depression: A Comparative Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 1-28, February.
    8. Rostislav Kapeliushnikov, 2019. "The phantom of technological unemployment," Russian Journal of Economics, ARPHA Platform, vol. 5(1), pages 88-116, April.
    9. James H. Stock & Mark W. Watson, 2019. "Slack and Cyclically Sensitive Inflation," NBER Working Papers 25987, National Bureau of Economic Research, Inc.
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    12. Ihtisham Ul Haq & Alam Khan & Ejaz Ahmed, 2012. "Phillips Curve or Locus Critique: Time Series Evidence from Pakistan," Journal of Economics and Behavioral Studies, AMH International, vol. 4(4), pages 190-193.
    13. M. Aynul Hasan, 1988. "Is there a Phillips Curve in Pakistan?," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 27(4), pages 839-851.
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    More about this item

    Keywords

    Phillips Curve Pakistan;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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