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Corresponding Author:
Pavlos Stamatiou, Department of Accounting and Finance, Western Macedonia University of Applied Sciences, Kozani, Greece

Coauthors:
Chaido Dritsaki, Department of Accounting and Finance, Western Macedonia University of Applied Sciences, Kozani, Greece

The Phillips Curve: Unemployment Dynamics and Nairu Estimates of Poland’s Economy

Volume 72 - Issue 3, August 2019
(pp. 281-312)
JEL classification: C22, C32, E31, E50
Keywords: Inflation, Unemployment, NAIRU, Phillips Curve, Poland, Autoregressive Distributed Lag Cointegration Test, Toda-Yamamoto Causality Test, Variance Decomposition, Impulse Response Function

Abstract

The purpose of this paper is to investigate the relationship between inflation and unemployment rate, in the case of Poland over the period 1992-2017, within the Phillips curve context. For the long-term equilibrium relationship and the causal relationship of the examined variables, the Autoregressive Distributed Lag (ARDL) technique developed by Pesaran et al. (2001) and the causality approach of Toda and Yamamoto (1995) are applied, as the most appropriate for the sample size and the integration of the variables. The results of the study revealed that there is a long run relation between unemployment rate and the inflation rate for Poland, for the aforementioned period. In addition, the causality results indicated a unidirectional relationship between unemployment rate and inflation rate, with direction from unemployment to inflation. Finally, to forecast the model variables, the impulse response functions and the variance decomposition method are applied. The results for a 10-year forecasting period indicated that shocks in unemployment rate cause a decrease on inflation rate for the first years, followed by a steady increase for the remaining years. Policy implications are then explored in the conclusions.

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The Phillips Curve: Unemployment Dynamics and Nairu Estimates of Poland’s Economy

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Institute for International Economics of the Genoa Chamber of Commerce

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of the Genoa Chamber of Commerce