The Relationship Between Unemployment and Inflation--Evidence From U.S. Economy

DOI

10.2991/aebmr.k.201211.029How to use a DOI?

Keywords

VAR, unemployment, inflation, U.S. economy, impulse response function1

Abstract

In this paper, we apply the Vector Autoregression (VAR) method to check the robustness of Phillips Curve in U.S. economy from Q2 1962 to Q4 2019. Using the cyclical unemployment rate and inflation, the data is described by VAR (4) with a cointegrating rank as 2. To analyse the relation between unemployment rate and inflation, Impulse Response Function (IRF) and Variance Decomposition (VD) are calculated. The results of Granger-causal Test show that the history information of unemployment is helpful for improving the forecasts of inflation. With an increasing forecast horizon, unemployment shocks play an important role on the forecast error variance of inflation. Based on impulse response function, Phillips Curve is still alive in U.S. economy for both long term and short term.

Copyright

© 2020, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Yizhuo Qin
PY  - 2020
DA  - 2020/12/14
TI  - The Relationship Between Unemployment and Inflation--Evidence From U.S. Economy
BT  - Proceedings of the Fifth International Conference on Economic and Business Management (FEBM 2020)
PB  - Atlantis Press
SP  - 157
EP  - 162
SN  - 2352-5428
UR  - https://doi.org/10.2991/aebmr.k.201211.029
DO  - 10.2991/aebmr.k.201211.029
ID  - Qin2020
ER  -