This document discusses the relationship between unemployment and inflation in India based on the Phillips curve concept. It analyzes unemployment and inflation rates from 2009 to 2017 using secondary data from the Reserve Bank of India and Ministry of Labour and Employment. The results show unemployment and inflation are inversely related in the short run, confirming the existence of the Phillips curve in India. Specifically, it found that (1) unemployment was highest in 2009 at 3.75% while inflation peaked in 2010 at 12.11%, (2) changes in unemployment and inflation moved in opposite directions from 2009 to 2016, indicating a short-run trade-off as predicted by the Phillips curve. The study concludes the Phillips curve framework is valid for analyzing inflation-unemployment dynamics
This document discusses different types of unemployment including frictional, structural, seasonal, and cyclical unemployment. It also discusses Okun's law and the relationship between inflation and unemployment shown by the Phillips curve. The Phillips curve initially showed an inverse relationship between inflation and unemployment but this broke down in the late 1960s. The long-run Phillips curve is vertical at the natural rate of unemployment. Government policies can affect inflation and unemployment in both the short-run and long-run.
The document provides an overview of the Phillips curve, which shows the relationship between unemployment and inflation. It discusses the history of the Phillips curve developed by A.W. Phillips and debates around the short-run versus long-run curve. It also examines different types of inflation (cost-push, demand-pull) and unemployment (natural, structural, frictional, cyclical). Finally, it analyzes the relationship between inflation and unemployment and how policies aimed at reducing one may impact the other.
The Phillips curve describes an inverse relationship between unemployment and inflation, such that lower unemployment is associated with higher inflation. While observed to be stable in the short-run, it does not hold in the long-run. The document discusses the origins of the Phillips curve from William Phillips' 1958 paper and subsequent modifications by economists like Friedman and Phelps who argued it does not reflect long-run economic realities. It also examines shifts to the Phillips curve from supply shocks and how the relationship between unemployment and inflation is now understood with incorporation of inflation expectations.
- The short-run Phillips curve shows an inverse relationship between unemployment and inflation in the short term, but this disappears in the long run.
- Milton Friedman argued that in the long run, inflation is dependent on expected inflation rather than actual unemployment. The long-run Phillips curve is vertical at the natural rate of unemployment.
- Differences between expected and actual inflation can cause temporary deviations from the natural rate of unemployment in the short run, but inflation expectations eventually adjust, and unemployment returns to the natural rate in the long run.
Inflation and Unemployment in Nigeria: An ARDL- ApproachPremier Publishers
This study examines the effect of inflation on unemployment in Nigeria. Unemployment is a major problem in Nigeria, even with the growth rate of 7% within the study period, the problem is still on the increase. The study uses the period 1977 to 2011 in analyzing the long run impact of inflation on unemployment in Nigeria, based on the Phillips curve hypothesis, instead of relying on the traditional ballpark figure made by Nigerians. Real gross domestic product is also used as control variable. The study employed an Autoregressive Distributed Lag (ARDL) Model to test for bounds co-integration, the long run and the Error Correction Adjustment. The co-integration bound test showed that the variables are co-integrated. Our Findings validate the Phillips curve hypothesis as well, contradict the belief by Nigerians about the coexistence of unemployment and inflation in the country.
How inflation and unemployment are relatedAlok upadhayay
The document discusses the relationship between inflation and unemployment. It begins by explaining the inverse correlation between inflation and unemployment based on principles of supply and demand. When demand for labor exceeds supply, wage inflation rises and vice versa. The Phillips Curve, developed by A.W. Phillips, showed this inverse relationship, though it was nonlinear. While the Phillips Curve could be used by policymakers to balance inflation and unemployment in the short run, monetarists like Milton Friedman argued it did not apply in the long run. The relationship between inflation and unemployment only works temporarily, not as a permanent policy tool.
Lecture_Unemployment and Inflation (Phillips Curve Relationship) (1).pptxuobdRydh
This document discusses different types and measurement of unemployment, including frictional, structural, and cyclical unemployment. It also discusses Milton Friedman's natural rate hypothesis and the relationship between inflation and unemployment known as the Phillips curve. Friedman argued that there is a negative relationship between unanticipated inflation and cyclical unemployment in the short run, but that in the long run inflation expectations adjust and unemployment returns to the natural rate even if inflation remains higher. The Phillips curve is thus vertical in the long run. The document also discusses Keynesian and monetarist views of the inflation-unemployment tradeoff.
This document discusses different theories of unemployment, including:
1) It describes different types of unemployment including frictional, structural, and cyclical unemployment.
2) It explains the classical view that full employment is always achieved through flexible wages adjusting to clear the labor market.
3) It outlines Keynes' view that unemployment can persist if aggregate demand is insufficient, with the aggregate supply curve being horizontal in the short-run so that unemployment, not prices, adjust. Fiscal policy can be used to increase aggregate demand.
4) Wages are downwardly rigid in the short-run in the Keynesian model, so that real wages rise when prices fall during recessions even as nominal wages remain
This document discusses different types of unemployment including frictional, structural, seasonal, and cyclical unemployment. It also discusses Okun's law and the relationship between inflation and unemployment shown by the Phillips curve. The Phillips curve initially showed an inverse relationship between inflation and unemployment but this broke down in the late 1960s. The long-run Phillips curve is vertical at the natural rate of unemployment. Government policies can affect inflation and unemployment in both the short-run and long-run.
The document provides an overview of the Phillips curve, which shows the relationship between unemployment and inflation. It discusses the history of the Phillips curve developed by A.W. Phillips and debates around the short-run versus long-run curve. It also examines different types of inflation (cost-push, demand-pull) and unemployment (natural, structural, frictional, cyclical). Finally, it analyzes the relationship between inflation and unemployment and how policies aimed at reducing one may impact the other.
The Phillips curve describes an inverse relationship between unemployment and inflation, such that lower unemployment is associated with higher inflation. While observed to be stable in the short-run, it does not hold in the long-run. The document discusses the origins of the Phillips curve from William Phillips' 1958 paper and subsequent modifications by economists like Friedman and Phelps who argued it does not reflect long-run economic realities. It also examines shifts to the Phillips curve from supply shocks and how the relationship between unemployment and inflation is now understood with incorporation of inflation expectations.
- The short-run Phillips curve shows an inverse relationship between unemployment and inflation in the short term, but this disappears in the long run.
- Milton Friedman argued that in the long run, inflation is dependent on expected inflation rather than actual unemployment. The long-run Phillips curve is vertical at the natural rate of unemployment.
- Differences between expected and actual inflation can cause temporary deviations from the natural rate of unemployment in the short run, but inflation expectations eventually adjust, and unemployment returns to the natural rate in the long run.
Inflation and Unemployment in Nigeria: An ARDL- ApproachPremier Publishers
This study examines the effect of inflation on unemployment in Nigeria. Unemployment is a major problem in Nigeria, even with the growth rate of 7% within the study period, the problem is still on the increase. The study uses the period 1977 to 2011 in analyzing the long run impact of inflation on unemployment in Nigeria, based on the Phillips curve hypothesis, instead of relying on the traditional ballpark figure made by Nigerians. Real gross domestic product is also used as control variable. The study employed an Autoregressive Distributed Lag (ARDL) Model to test for bounds co-integration, the long run and the Error Correction Adjustment. The co-integration bound test showed that the variables are co-integrated. Our Findings validate the Phillips curve hypothesis as well, contradict the belief by Nigerians about the coexistence of unemployment and inflation in the country.
How inflation and unemployment are relatedAlok upadhayay
The document discusses the relationship between inflation and unemployment. It begins by explaining the inverse correlation between inflation and unemployment based on principles of supply and demand. When demand for labor exceeds supply, wage inflation rises and vice versa. The Phillips Curve, developed by A.W. Phillips, showed this inverse relationship, though it was nonlinear. While the Phillips Curve could be used by policymakers to balance inflation and unemployment in the short run, monetarists like Milton Friedman argued it did not apply in the long run. The relationship between inflation and unemployment only works temporarily, not as a permanent policy tool.
Lecture_Unemployment and Inflation (Phillips Curve Relationship) (1).pptxuobdRydh
This document discusses different types and measurement of unemployment, including frictional, structural, and cyclical unemployment. It also discusses Milton Friedman's natural rate hypothesis and the relationship between inflation and unemployment known as the Phillips curve. Friedman argued that there is a negative relationship between unanticipated inflation and cyclical unemployment in the short run, but that in the long run inflation expectations adjust and unemployment returns to the natural rate even if inflation remains higher. The Phillips curve is thus vertical in the long run. The document also discusses Keynesian and monetarist views of the inflation-unemployment tradeoff.
This document discusses different theories of unemployment, including:
1) It describes different types of unemployment including frictional, structural, and cyclical unemployment.
2) It explains the classical view that full employment is always achieved through flexible wages adjusting to clear the labor market.
3) It outlines Keynes' view that unemployment can persist if aggregate demand is insufficient, with the aggregate supply curve being horizontal in the short-run so that unemployment, not prices, adjust. Fiscal policy can be used to increase aggregate demand.
4) Wages are downwardly rigid in the short-run in the Keynesian model, so that real wages rise when prices fall during recessions even as nominal wages remain
The document discusses different types of unemployment including voluntary, involuntary, seasonal, structural, cyclical, technological, disguised, and hidden unemployment. It explains how unemployment is measured by comparing the labor force to the number of employed individuals. The relationship between inflation and unemployment is also examined through the Phillips Curve model, which shows an inverse relationship where rising wages/inflation leads to lower unemployment. Factors like structural changes, cost-push inflation, and government transfers can impact the Phillips Curve relationship over time.
Long run and short run Philips curve by A W Philips.maitrytaylor01
This document discusses the Phillips curve, which describes the relationship between inflation and unemployment. In the short run, lower unemployment is associated with higher inflation (the short-run Phillips curve). However, in the long run there is no stable tradeoff between inflation and unemployment - the long-run Phillips curve is vertical at the natural rate of unemployment. The relationship broke down in the 1970s, leading to "stagflation" with high inflation and unemployment.
The document discusses the relationship between inflation and unemployment as depicted by the Phillips curve. It explains that demand-pull inflation is caused by increases in aggregate demand, while cost-push inflation stems from increases in costs of production. The Phillips curve shows an inverse relationship between inflation and unemployment in the short run, but this relationship breaks down in the long run as inflation expectations rise. The natural rate of unemployment is the rate at which inflation remains stable in the long run.
The Philip curve shows an inverse relationship between the rate of unemployment and the rate of change in money wages in the short run. Friedman argued that in the long run, there is no tradeoff between inflation and unemployment - the Philip curve becomes vertical at the natural rate of unemployment, which is the rate where expected and actual inflation are equal. Temporary reductions in unemployment below the natural rate are only possible if inflation rises above expectations, but eventually expectations will adjust and unemployment will return to the natural rate, even as inflation accelerates.
This document is a project report submitted by Bishu Giri in partial fulfillment of the requirements for a Master of Science degree in Applied Quantitative Finance from Madras School of Economics and Central University of Tamil Nadu in June 2015. The report examines the measure of sacrifice ratio for India using quarterly data on GDP and wholesale price index from 1980 to 2008. It finds that the average sacrifice ratio for India is 0.36, indicating that reducing inflation does not result in very high output losses. However, the sacrifice ratio varies over different time periods.
One of the most pressing problems facing the Kenyan economy is the high rates of unemployment,
which has been erratic over the past few years. To examine the existing relationship between unemployment and
economic growth, this paper employed Johansen Cointegration, error correction mechanism (ECM),
This document discusses different types of unemployment including frictional, seasonal, cyclical, structural, and disguised unemployment. It also discusses underemployment and defines unemployment rate, labor force participation rate, and discouraged workers. Additionally, it covers the relationship between unemployment and inflation including the short-run and long-run Phillips curves. Expected inflation rate is identified as a key factor that can shift the short-run Phillips curve. The natural rate hypothesis and need for disinflation policies if unemployment is kept below the natural rate for too long are also summarized.
THE CHALLENGE OF INFLATION AND ITS CONSUMPTION RELATIONpaperpublications3
Abstract: Indian economy is a developing economy and it faces many challenges from all directions. It also faces some extra challenges not only economic but also from other sectors of society. In this paper the challenge of inflation and its consumption relation is explained. Many economic experts and political world leaders accused Indian consumers for the world inflation rise. Indian particularly middle and lower income families feet the heat of the inflation more intensively than higher income group peoples. Inflation is basically problem of demand and supply equation, but many other factors also involved in it. Some dilemma of the inflation is presented in this paper. Not only people of India but also the central and states governments are also afraid of inflation. Many economists we well as politicians assumed that inflation is affecting the consumption or the consumer is the cause of inflation.
THE CHALLENGE OF INFLATION AND ITS CONSUMPTION RELATIONpaperpublications3
Abstract: Indian economy is a developing economy and it faces many challenges from all directions. It also faces some extra challenges not only economic but also from other sectors of society. In this paper the challenge of inflation and its consumption relation is explained. Many economic experts and political world leaders accused Indian consumers for the world inflation rise. Indian particularly middle and lower income families feet the heat of the inflation more intensively than higher income group peoples. Inflation is basically problem of demand and supply equation, but many other factors also involved in it. Some dilemma of the inflation is presented in this paper. Not only people of India but also the central and states governments are also afraid of inflation. Many economists we well as politicians assumed that inflation is affecting the consumption or the consumer is the cause of inflation.
The document discusses various topics related to inflation and unemployment. It defines inflation and describes the Phillips curve relationship between inflation and unemployment. It outlines demand-pull and cost-push causes of inflation. It also discusses stagflation, costs of inflation, and the short-run and long-run Phillips curves. The document describes how the Phillips curve relationship breaks down in the long-run and the natural rate of unemployment. It also discusses types of unemployment like frictional, structural, seasonal, and cyclical unemployment as well as Okun's law.
The document discusses various topics related to inflation and unemployment. It defines inflation and introduces the Phillips curve, which shows the relationship between inflation and unemployment. It outlines two types of inflation: demand-pull and cost-push. It then discusses stagflation, the costs of inflation, and the Phillips curve relationship in both the short-run and long-run. It also covers types of unemployment, such as frictional, structural, seasonal, and cyclical unemployment, as well as Okun's law relating unemployment and GDP.
ANALYZING AND MEASURING THE CAUSAL RELATIONSHIP BETWEEN INFLATION AND UNEMPLO...indexPub
This study aims to analyze and measure the causal relationship between the inflation rate and the unemployment rate in Iraq for the period 2004-2021, utilizing the Phillips curve methodology to analyze the causal relationship between inflation and unemployment rates.The study found a weak inverse relationship between the inflation and unemployment rates in Iraq during the period 2004-2021, indicating a relative decoupling of the impact between changes in inflation and unemployment.
This document summarizes a study examining the relationship between inflation and economic growth in Ethiopia from 2000 to 2019. The study used time series data and various econometric tests including unit root tests, cointegration tests, and Granger causality tests. The results found that inflation and economic growth were cointegrated, indicating a long-run relationship. However, the Granger causality tests found no evidence that either inflation or economic growth Granger causes the other, suggesting their influence is contemporaneous. The document provides context on debates around the relationship between inflation and growth and reviews related literature, finding mixed results on the nature and direction of the relationship in different countries and time periods.
The document summarizes the Phillips curve, which was developed by A.W. Phillips in 1958 and shows an inverse relationship between unemployment and wage inflation. It describes how the curve plots the percentage change in wages on the y-axis against the unemployment rate on the x-axis, with a downward sloping curve indicating that higher wage growth occurs when unemployment is lower. The document then discusses Friedman's view that in the long run, the Phillips curve becomes vertical at the natural rate of unemployment, where inflation remains stable regardless of the unemployment rate.
This document discusses unemployment and inflation. It defines unemployment and discusses how unemployment rates can be manipulated. It also discusses the labor force survey used in Europe. It then discusses different types of unemployment including frictional, structural, and cyclical unemployment. The document also discusses the relationship between unemployment and inflation, including the Phillips curve and the natural rate of unemployment. It discusses criticisms of the relationship between inflation and unemployment and costs of both unemployment and inflation.
The document discusses various types of inflation including creeping, walking, running, and hyper inflation based on annual rates of price increases. It also discusses demand-pull and cost-push inflation and their causes such as increases in money supply, government spending, wages, and costs of production. The effects of inflation include impacts on production, distribution, social conditions, and politics. Methods to control inflation discussed include monetary, fiscal, and direct policies.
Unemployment is measured as the number of people willing and able to work but unable to find employment. There are different types of unemployment including cyclical, frictional, and structural. Theories of unemployment include the Keynesian and classical theories. Keynesian theory states that aggregate demand determines employment while classical theory says real wages impact employment. Unemployment has costs like reduced income and increased dependence. The NAIRU is the lowest unemployment rate that avoids inflation increases. Factors like productivity and benefits influence the NAIRU, which is important for policymakers to consider.
BusinessAnalyticsProject_Relationship Between Inflation, Unemployment & Fed RateMarcus Jones
This document discusses a study analyzing the relationship between inflation, unemployment, and the federal funds rate in the US from 2005 to 2015. It provides background on the traditional inverse relationship between inflation and unemployment known as the Phillips curve. While this relationship held historically, it has become less stable in the US in recent decades due to the Federal Reserve's use of monetary policy tools like interest rates to influence inflation. The study aims to test the correlations between unemployment, the federal funds rate, and inflation rates over the past 10 years using statistical analysis techniques. It reviews other research on the Phillips curve and factors like monetary policy that can impact the relationships between these economic indicators.
Macro Economics: Phillips Curve, Inflation and Interest RateZeeshan Ali
The document discusses the Phillips Curve, which describes the relationship between inflation and unemployment. It states that Phillips observed an inverse relationship between inflation and unemployment in the UK from 1861 to 1957. It then provides details on the contents of the Phillips Curve, including demand-pull and cost-push inflation. Finally, it explains the short-run and long-run Phillips Curves, noting that in the short-run there is a trade-off between inflation and unemployment, but in the long-run the natural unemployment rate is unchanged by inflation.
At Affordable Garage Door Repair, we specialize in both residential and commercial garage door services, ensuring your property is secure and your doors are running smoothly.
Amid the constant barrage of distractions and dwindling motivation, self-discipline emerges as the unwavering beacon that guides individuals toward triumph. This vital quality serves as the key to unlocking one’s true potential, whether the aspiration is to attain personal goals, ascend the career ladder, or refine everyday habits.
Understanding Self-Discipline
The document discusses different types of unemployment including voluntary, involuntary, seasonal, structural, cyclical, technological, disguised, and hidden unemployment. It explains how unemployment is measured by comparing the labor force to the number of employed individuals. The relationship between inflation and unemployment is also examined through the Phillips Curve model, which shows an inverse relationship where rising wages/inflation leads to lower unemployment. Factors like structural changes, cost-push inflation, and government transfers can impact the Phillips Curve relationship over time.
Long run and short run Philips curve by A W Philips.maitrytaylor01
This document discusses the Phillips curve, which describes the relationship between inflation and unemployment. In the short run, lower unemployment is associated with higher inflation (the short-run Phillips curve). However, in the long run there is no stable tradeoff between inflation and unemployment - the long-run Phillips curve is vertical at the natural rate of unemployment. The relationship broke down in the 1970s, leading to "stagflation" with high inflation and unemployment.
The document discusses the relationship between inflation and unemployment as depicted by the Phillips curve. It explains that demand-pull inflation is caused by increases in aggregate demand, while cost-push inflation stems from increases in costs of production. The Phillips curve shows an inverse relationship between inflation and unemployment in the short run, but this relationship breaks down in the long run as inflation expectations rise. The natural rate of unemployment is the rate at which inflation remains stable in the long run.
The Philip curve shows an inverse relationship between the rate of unemployment and the rate of change in money wages in the short run. Friedman argued that in the long run, there is no tradeoff between inflation and unemployment - the Philip curve becomes vertical at the natural rate of unemployment, which is the rate where expected and actual inflation are equal. Temporary reductions in unemployment below the natural rate are only possible if inflation rises above expectations, but eventually expectations will adjust and unemployment will return to the natural rate, even as inflation accelerates.
This document is a project report submitted by Bishu Giri in partial fulfillment of the requirements for a Master of Science degree in Applied Quantitative Finance from Madras School of Economics and Central University of Tamil Nadu in June 2015. The report examines the measure of sacrifice ratio for India using quarterly data on GDP and wholesale price index from 1980 to 2008. It finds that the average sacrifice ratio for India is 0.36, indicating that reducing inflation does not result in very high output losses. However, the sacrifice ratio varies over different time periods.
One of the most pressing problems facing the Kenyan economy is the high rates of unemployment,
which has been erratic over the past few years. To examine the existing relationship between unemployment and
economic growth, this paper employed Johansen Cointegration, error correction mechanism (ECM),
This document discusses different types of unemployment including frictional, seasonal, cyclical, structural, and disguised unemployment. It also discusses underemployment and defines unemployment rate, labor force participation rate, and discouraged workers. Additionally, it covers the relationship between unemployment and inflation including the short-run and long-run Phillips curves. Expected inflation rate is identified as a key factor that can shift the short-run Phillips curve. The natural rate hypothesis and need for disinflation policies if unemployment is kept below the natural rate for too long are also summarized.
THE CHALLENGE OF INFLATION AND ITS CONSUMPTION RELATIONpaperpublications3
Abstract: Indian economy is a developing economy and it faces many challenges from all directions. It also faces some extra challenges not only economic but also from other sectors of society. In this paper the challenge of inflation and its consumption relation is explained. Many economic experts and political world leaders accused Indian consumers for the world inflation rise. Indian particularly middle and lower income families feet the heat of the inflation more intensively than higher income group peoples. Inflation is basically problem of demand and supply equation, but many other factors also involved in it. Some dilemma of the inflation is presented in this paper. Not only people of India but also the central and states governments are also afraid of inflation. Many economists we well as politicians assumed that inflation is affecting the consumption or the consumer is the cause of inflation.
THE CHALLENGE OF INFLATION AND ITS CONSUMPTION RELATIONpaperpublications3
Abstract: Indian economy is a developing economy and it faces many challenges from all directions. It also faces some extra challenges not only economic but also from other sectors of society. In this paper the challenge of inflation and its consumption relation is explained. Many economic experts and political world leaders accused Indian consumers for the world inflation rise. Indian particularly middle and lower income families feet the heat of the inflation more intensively than higher income group peoples. Inflation is basically problem of demand and supply equation, but many other factors also involved in it. Some dilemma of the inflation is presented in this paper. Not only people of India but also the central and states governments are also afraid of inflation. Many economists we well as politicians assumed that inflation is affecting the consumption or the consumer is the cause of inflation.
The document discusses various topics related to inflation and unemployment. It defines inflation and describes the Phillips curve relationship between inflation and unemployment. It outlines demand-pull and cost-push causes of inflation. It also discusses stagflation, costs of inflation, and the short-run and long-run Phillips curves. The document describes how the Phillips curve relationship breaks down in the long-run and the natural rate of unemployment. It also discusses types of unemployment like frictional, structural, seasonal, and cyclical unemployment as well as Okun's law.
The document discusses various topics related to inflation and unemployment. It defines inflation and introduces the Phillips curve, which shows the relationship between inflation and unemployment. It outlines two types of inflation: demand-pull and cost-push. It then discusses stagflation, the costs of inflation, and the Phillips curve relationship in both the short-run and long-run. It also covers types of unemployment, such as frictional, structural, seasonal, and cyclical unemployment, as well as Okun's law relating unemployment and GDP.
ANALYZING AND MEASURING THE CAUSAL RELATIONSHIP BETWEEN INFLATION AND UNEMPLO...indexPub
This study aims to analyze and measure the causal relationship between the inflation rate and the unemployment rate in Iraq for the period 2004-2021, utilizing the Phillips curve methodology to analyze the causal relationship between inflation and unemployment rates.The study found a weak inverse relationship between the inflation and unemployment rates in Iraq during the period 2004-2021, indicating a relative decoupling of the impact between changes in inflation and unemployment.
This document summarizes a study examining the relationship between inflation and economic growth in Ethiopia from 2000 to 2019. The study used time series data and various econometric tests including unit root tests, cointegration tests, and Granger causality tests. The results found that inflation and economic growth were cointegrated, indicating a long-run relationship. However, the Granger causality tests found no evidence that either inflation or economic growth Granger causes the other, suggesting their influence is contemporaneous. The document provides context on debates around the relationship between inflation and growth and reviews related literature, finding mixed results on the nature and direction of the relationship in different countries and time periods.
The document summarizes the Phillips curve, which was developed by A.W. Phillips in 1958 and shows an inverse relationship between unemployment and wage inflation. It describes how the curve plots the percentage change in wages on the y-axis against the unemployment rate on the x-axis, with a downward sloping curve indicating that higher wage growth occurs when unemployment is lower. The document then discusses Friedman's view that in the long run, the Phillips curve becomes vertical at the natural rate of unemployment, where inflation remains stable regardless of the unemployment rate.
This document discusses unemployment and inflation. It defines unemployment and discusses how unemployment rates can be manipulated. It also discusses the labor force survey used in Europe. It then discusses different types of unemployment including frictional, structural, and cyclical unemployment. The document also discusses the relationship between unemployment and inflation, including the Phillips curve and the natural rate of unemployment. It discusses criticisms of the relationship between inflation and unemployment and costs of both unemployment and inflation.
The document discusses various types of inflation including creeping, walking, running, and hyper inflation based on annual rates of price increases. It also discusses demand-pull and cost-push inflation and their causes such as increases in money supply, government spending, wages, and costs of production. The effects of inflation include impacts on production, distribution, social conditions, and politics. Methods to control inflation discussed include monetary, fiscal, and direct policies.
Unemployment is measured as the number of people willing and able to work but unable to find employment. There are different types of unemployment including cyclical, frictional, and structural. Theories of unemployment include the Keynesian and classical theories. Keynesian theory states that aggregate demand determines employment while classical theory says real wages impact employment. Unemployment has costs like reduced income and increased dependence. The NAIRU is the lowest unemployment rate that avoids inflation increases. Factors like productivity and benefits influence the NAIRU, which is important for policymakers to consider.
BusinessAnalyticsProject_Relationship Between Inflation, Unemployment & Fed RateMarcus Jones
This document discusses a study analyzing the relationship between inflation, unemployment, and the federal funds rate in the US from 2005 to 2015. It provides background on the traditional inverse relationship between inflation and unemployment known as the Phillips curve. While this relationship held historically, it has become less stable in the US in recent decades due to the Federal Reserve's use of monetary policy tools like interest rates to influence inflation. The study aims to test the correlations between unemployment, the federal funds rate, and inflation rates over the past 10 years using statistical analysis techniques. It reviews other research on the Phillips curve and factors like monetary policy that can impact the relationships between these economic indicators.
Macro Economics: Phillips Curve, Inflation and Interest RateZeeshan Ali
The document discusses the Phillips Curve, which describes the relationship between inflation and unemployment. It states that Phillips observed an inverse relationship between inflation and unemployment in the UK from 1861 to 1957. It then provides details on the contents of the Phillips Curve, including demand-pull and cost-push inflation. Finally, it explains the short-run and long-run Phillips Curves, noting that in the short-run there is a trade-off between inflation and unemployment, but in the long-run the natural unemployment rate is unchanged by inflation.
At Affordable Garage Door Repair, we specialize in both residential and commercial garage door services, ensuring your property is secure and your doors are running smoothly.
Amid the constant barrage of distractions and dwindling motivation, self-discipline emerges as the unwavering beacon that guides individuals toward triumph. This vital quality serves as the key to unlocking one’s true potential, whether the aspiration is to attain personal goals, ascend the career ladder, or refine everyday habits.
Understanding Self-Discipline
Biography and career history of Bruno AmezcuaBruno Amezcua
Bruno Amezcua's entry into the film and visual arts world seemed predestined. His grandfather, a distinguished film editor from the 1950s through the 1970s, profoundly influenced him. This familial mentorship early on exposed him to the nuances of film production and a broad array of fine arts, igniting a lifelong passion for narrative creation. Over 15 years, Bruno has engaged in diverse projects showcasing his dedication to the arts.
Insanony: Watch Instagram Stories Secretly - A Complete GuideTrending Blogers
Welcome to the world of social media, where Instagram reigns supreme! Today, we're going to explore a fascinating tool called Insanony that lets you watch Instagram Stories secretly. If you've ever wanted to view someone's story without them knowing, this blog is for you. We'll delve into everything you need to know about Insanony with Trending Blogers!
MISS TEEN LUCKNOW 2024 - WINNER ASIYA 2024DK PAGEANT
In the dynamic city of Lucknow, known for its wealthy social legacy and authentic importance, a youthful star has developed, capturing the hearts of numerous with her elegance, insights, and eagerness. Asiya, as of late delegated as the champ from Lucknow for Miss Youngster India 2024 by the DK Pageant, stands as a confirmation of the monstrous ability and potential dwelling inside the youth of India. This exceptional young lady is a signal of excellence and a paragon of devotion and aspiration.
MRS PUNE 2024 - WINNER AMRUTHAA UTTAM JAGDHANEDK PAGEANT
Amruthaa Uttam Jagdhane, a stunning woman from Pune, has won the esteemed title of Mrs. India 2024, which is given out by the Dk Exhibition. Her journey to this prestigious accomplishment is a confirmation of her faithful assurance, extraordinary gifts, and profound commitment to enabling women.
The Fascinating World of Bats: Unveiling the Secrets of the Nightthomasard1122
The Fascinating World of Bats: Unveiling the Secrets of the Night
Bats, the mysterious creatures of the night, have long been a source of fascination and fear for humans. With their eerie squeaks and fluttering wings, they have captured our imagination and sparked our curiosity. Yet, beyond the myths and legends, bats are fascinating creatures that play a vital role in our ecosystem.
There are over 1,300 species of bats, ranging from the tiny Kitti's hog-nosed bat to the majestic flying foxes. These winged mammals are found in almost every corner of the globe, from the scorching deserts to the lush rainforests. Their diversity is a testament to their adaptability and resilience.
Bats are insectivores, feeding on a vast array of insects, from mosquitoes to beetles. A single bat can consume up to 1,200 insects in an hour, making them a crucial part of our pest control system. By preying on insects that damage crops, bats save the agricultural industry billions of dollars each year.
But bats are not just useful; they are also fascinating creatures. Their ability to fly in complete darkness, using echolocation to navigate and hunt, is a remarkable feat of evolution. They are also social animals, living in colonies and communicating with each other through a complex system of calls and body language.
Despite their importance, bats face numerous threats, from habitat destruction to climate change. Many species are endangered, and conservation efforts are necessary to protect these magnificent creatures.
In conclusion, bats are more than just creatures of the night; they are a vital part of our ecosystem, playing a crucial role in maintaining the balance of nature. By learning more about these fascinating animals, we can appreciate their importance and work to protect them for generations to come. So, let us embrace the beauty and mystery of bats, and celebrate their unique place in our world.
1. [ VOLUME 5 I ISSUE 2 I APRIL – JUNE 2018] E ISSN 2348 –1269, PRINT ISSN 2349-5138
692 IJRAR- International Journal of Research and Analytical Reviews Research Paper
A STUDY ON UNEMPLOYMENT AND INFLATION IN INDIA: THE SHORT RUN
PHILLIPS CURVE APPROACH
Dr. M. Thiruneelakandan * & Dr. R. Ullamudaiyar**
*Guest Lecturer, PG and Research Department of Economics, Alagappa Government Arts College,
Karaikudi, Tamilnadu, India
**Assistant Professor,PG and Research Department of Economics, A. V. C College (Autonomous),
Mayiladurai, Tamilnadu, India
Received: April 01, 2018 Accepted: May 04, 2018
ABSTRACT The productive capacity of the economy down due to stagnation and excess capacity was
increasing. The trade on between unemployment and inflation along with the sectors used high level
modern technology machinery and excess labour force of the nation. The economy happened
underemployment was nature in short run period but unemployment is very crucial problem for it. The
famous British economist A. W. Phillips who first identified it, it expresses an inverse relationship
between the rate of unemployment and the rate of increase in money wages (Real Income or Labour
Productivity). The objectives wasstudy on trends of unemployment and inflation rate in India and
examine trade -off between unemployment and inflation in Indian economy - The Phillips curve concept.
The present paper used secondary data in period from 2009 to 2017. Therefore, data were sourced from
Reserve bank of India (RBI) statistical bulletin and Ministry of labour and Employment and using with
simple average, percentage method and trend line and The result of the test revealed that
unemployment and inflation are inversely related, thus confirming the existence of the Phillips curve in
India.
Keywords: Labour force, Unemployment, Inflation, Wage rate
Introduction
Indian economy facing stagnation which means the unemployment and inflation belong same time. The
cheap monetary and fiscal policy which is creates money supply and income of the country’s people while
the real GDP goes down, the reason for that like unproductive growth that is problem of our economy. The
productive capacity of the economy down due to stagnation and excess capacity was increasing. The trade
on between unemployment and inflation along with the sectors used high level modern technology
machinery and excess labour force of the nation. The economy happened underemployment was nature in
short run period but unemployment is very crucial problem for it. The famous British economist A. W.
Phillips who first identified it, it expresses an inverse relationship between the rate of unemployment and
the rate of increase in money wages (Real Income or Labour Productivity). The increase in labour
productivity or real income, were equilibrium of demand and supply of labour. When equilibrium of
demand and supply of labour is very low level of unemployment. The demand for labour depends upon
labour productivity and wage rate and the supply of labour depends upon wage rate and population. When
supply of labour excess over demand for labour condition of unemployment situation. The inverse
relationship between inflation and unemployment rate as represented by Phillips curve is only a short -
term relationship the factor which influences this inverse relationship between money wage rate and
unemployment is the nature of business activity. In a period of rising business activity when unemployment
falls with increasing demand for labour, the employers will bid up wages. Conversely in a period of falling
business activity when demand for labour is decreasing and unemployment is rising, employers will be
reluctant to grant wage increases. Rather, they will reduce wages. But workers and unions will be reluctant
to accept wage cut during such periods. Consequently, employers are forced to dismiss workers, thereby
leading to high rate of unemployment. Thus when the labour market is depressed, a small reduction in
wages would lead to large increase in unemployment. Phillips concluded on the basis of the above argument
that the relation between rates of unemployment and a change of money wages (Inflation) would be non-
linear. Such a curve is called the Phillips curve. The Phillips clearly explained about unemployment and real
GDP. The trade -off between rate of unemployment and real GDP. When increasing the unemployment rate
reduce the real GDP, its expresses maximum people unemployed, short in aggregate demand, profit
expectation low then reduce induced investment and real GDP.
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Problem of unemployment in India
The huge population pressure the main causes of increasing unemployment, in India’s population nearly 45
per cent of people under 15-35 age group, therefore heavy labour force. Shortage of skilled labour, lack of
capital formation of MSME and inefficient industrial location which are the other unemployment problem in
India.
Problem of inflation in India
Higher level inflationary gab, excess supply of money, very low productivity and excess import this are the
problems of inflation in India.
Objectives
1. To study on trends of unemployment and inflation rate in India
2. To examine trade -off between unemployment and inflation in Indian economy - The Phillips curve
concept.
Methodology
The present study used secondary data in period from 2009 to 2017. Therefore, data were sourced from
Reserve bank of India (RBI) statistical bulletin and Ministry of labour and Employment. The simple average,
percentage method and trend line were used in the study
THEORETICAL BACKROUND OF THE STUDY
In 1958, the Zealander economist William Phillips carried out Empirical Study of the British economy, using
data for the period from 1861 to 1957. This study estimates the relationship between the unemployment
rate and the rate of change in the money wage as an indicator of inflation, given that wages represent a
large proportion of the cost and thus the price, the results of the study reveal the presence of a trade-off
between the unemployment rate and the rate of change in wages as a representative of the rate of inflation.
Phelps interpreted the result of the study, that in booms, the demand for labor increase and the
unemployment rate decrease then workers have the opportunity to request higher wages while in periods
of depression, the demand for labor decrease and unemployment rate increase then the ability of workers
to demand higher wages is limited and decreasing wage rate increase significantly. This finding supports
Keynesian thought; therefore, a number of economists in the United States were encouraged to measure the
relationship between inflation and unemployment using data on the U.S. economy. The studies revealed the
inverse relationship between the two variables, which led to consolidate the results of a Phelps' study and
dubbed this relationship as the Phillips curve.
One of the earlier studies by Solow (1970) examined the relationship between the two variable inflation
rate and unemployment in the context of the United States. The results led to a conclusion that there existed
an inverse relationship between unemployment and inflation rates in the USA. Furthermore, Gordon (1971)
also confirmed the existence of a negative trade-off relationship between unemployment and inflation using
U.S. macroeconomic data.
Lucas (1976) strongly opposed the proposition of the existence of the Phillips curve. He argued that there
could have existed a trade-off relationship between unemployment and inflation if the workers did not
expect that the policy makers would try to create an artificial situation where high-inflation is paired with
low unemployment. Otherwise, the workers would foresee the high inflation in the future and would
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demand wage increase from their employers. In this case, there could be coexistence of high unemployment
and high inflation rate, which is known as the “Lucas critique”.
Furuoka, (2007) examined the trade-off the relationship between inflation rate and unemployment rate in
Malaysia. This paper used vector error correction (VECM) to test the relationship. The results revealed the
existence of the long run relationship among the variables. In other words, this paper has provided an
empirical evidence to support the existence of the Phillips curve in the case of Malaysia. Afzal and Awais,
(2012) also investigated the Inflation-Unemployment Trade Off in Pakistan. The empirical results show that
the Phillips curve holds in Pakistan. Similarly, Singh, and Verma, (2016) estimated the short-run tradeoff
between inflation and unemployment for the Indian economy over the period 2009-2015 using bi-variate
regression. The result showed the existence of the inverse relationship of inflation with the unemployment
in the short run.
Friedman(1968) in an alternative explanation argued that short-run Phillips curve, which are not vertical ,
arise due to the misperception of workers as to whether real wages have also increased following an
increase in the nominal wages. Friedman claimed that Phillips had made three mistakes (i) he failed to
distinguish between nominal wages and real wages (ii) he ignored temporary and, permanent trade-offs
between wage inflation and unemployment rate and (iii) he did not assign a role to expected inflation.
According to Firedman, there is only one long run, i.e. natural rate of unemployment which is compatible
with any perceived rate of inflation. Hence, there is a series of short run Phillips curves each conditional on
expected rate of price inflation.
RESULT AND DISCUSSION
Unemployment rate in India
The result and discussion based on objectives of the study firstly we have discussed about
unemployment rate in India. The unemployment rate in India during 2009 to 2017, the table and trend line
as given below.
Table 1: Unemployment rate of India in percentage during 2009-2017
Years Unemployment rate (%)
2009 3.75
2010 3.54
2011 3.53
2012 3.62
2013 3.46
2014 3.41
2015 3.49
2016 3.51
2017 3.52
Source: International Labour Organization (ILO)
From the figure 2, it has seen that unemployment rate is 2009 higher level indicate3.75 per cent compare to
other years, while the year of 2014 the unemployment rate is very low point of 3.41 per cent. In 2012
increased after two years at 3.65 per cent. The year of 2011 0.16 per cent decrease in unemplotment rate in
India, The happened of huge level unemployment in 2009 which refected US recession in 2008. Finally in
2017 India’s unemployment rate at 3.52 per cent.
Figure 1. Unemployment rate (%) in India
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Inflation rate in India
The result and discussion based on objectives of the study firstly we have discussed about inflation rate in
India. The inflation rate in India during 2009 to 2017, the table and trend line as given below.
Table 2: Inflation rate of India in percentage during 2009-2017
Years Inflation rate (%)
2009 10.83
2010 12.11
2011 8.87
2012 9.30
2013 10.92
2014 6.37
2015 5.88
2016 4.97
2017 2.49
Source: RBI Bulletin
The figure 1 shows average inflation rate (%) in India increased by 12.11 per cent in period of 2010, then
inflation rate is increased by 10.92 per cent at 2013 but decreased by 6.37 per cent in 2017. It was
decreased continuously and reached to 2.49 per cent in 2017. From the above data we can conclude that
situation of inflation in India sometime increased or decreased i.e., fluctuated not linearly changed.
Figure 2. Inflation rate (%) in India
Trade -off between Unemployment and Inflation in Indian economy during 2009 to 2017
The concept related to Phillips curve fall in unemployment increase in inflation and increase in
unemployment fall in inflation. The following table and diagram which is expressedvariation or change in
unemployment and inflation.
Table 3 Relationship between inflation—unemployment in India
Years Change in unemployment rate(%) Change in inflation rate (%)
2009 0.21 -1.28
2010 0.01 3.24
2011 -0.09 -0.43
2012 0.16 -1.62
2013 0.05 4.55
2014 -0.08 0.49
2015 -0.02 0.91
2016 -0.01 2.48
Source: Computed by Author
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From the table and figure 3, it has seen that whether Phillips curve situation exist in our Indian economy
during study period .Phillips curve means inverse relationship between inflation and unemployment in the
short run period. In 2009 registered above table unemployment rate change in 0.21 per cent while same
period inflation rate negatively 1.28 per cent. The years of 2014, 2015, 2016 the change in unemployment
rate is negatively respect of 0.08, 0.02 and 0.01 per cent when at the same time the year of 2014, 1015, 2016
the change in inflation rate positively like 0.49, 0.91 and 2.48 respectively, therefore trade-off between
unemployment and inflation in Indian economy during short run.
-2
-1
0
1
2
3
4
5
2009 2010 2011 2012 2013 2014 2015 2016
Change in unemployment rate
(%)
Change in inflation rate (%)
Figure 3.Relationship between unemployment and inflation in India
FINDINGS
The unemployment rate is 2009 higher level indicate3.75 per cent compare to other years, while the year of
2014 the unemployment rate is very low point of 3.41 per cent, the reason of huge level unemployment in
2009 to refected US recession in 2008.Average inflation rate (%) in India increased by 12.11 per cent in
period of 2010, then inflation rate is increased by 10.92 per cent at 2013 but decreased by 6.37 per cent in
2017. It was decreased continuously and reached to 2.49 per cent in 2017.In 2009 registered
unemployment rate change in 0.21 per cent while same period inflation rate negatively 1.28 per cent. The
years of 2014, 2015, 2016 the change in unemployment rate is negatively in respect of 0.08, 0.02 and 0.01
per cent when at the same time the year of 2014, 1015, 2016 the change in inflation rate positively like 0.49,
0.91 and 2.48 respectively, therefore trade-off between unemployment and inflation in Indian economy
during short run.
POLICY IMPLICATION
1. Need to capital account surplus which is creates capital accumulation and employment of the
country.
2. To active skill training programme which is help remove natural rate of unemployment
3. Increasing productive efficiency and import substitution of commodities, therefore reduce the price
of commodities
4. Essential to wage rigidity and labour unions there are help to promoting effective demand.
5. The economy follow the constant capital - labour ratio
6. Uniform and reliable imposing taxes
7. Improve self - employment, entrepreneurship development progamme and autonomous
investment of the country.
Conclusion
Therefore the Arthur Phillips relation of unemployment and inflation clearly show that Indian economy.
The another way of approach of Friedman indicates in short run relationship of unemployment and
inflation is inversely related but long run period of relationship of unemployment and inflation is directly
related therefore the natural rate of unemployment is interrupted. The natural rate of unemployment
means that structural plus frictional unemployment, therefore, the researcher in other to validate the
existence of a Phillips curve carried out various tests, using the Indian economy as a case study. The result
of the test revealed that unemployment and inflation are inversely related, thus confirming the existence of
the Phillips curve in India, with inflation having a significant impact on unemployment in India.
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Research Paper IJRAR- International Journal of Research and Analytical Reviews 697
References
1. Afzal, M., &Awais, S. (2012). Inflation-Unemployment Trade Off: Evidence from Pakistan. Journal of
Global Economy, 8(1), 21-32.
2. Dolly Singh and NmpVerma. (2016). Tradeoff between Inflation and Unemployment in the Short Run:
A Case of the Indian Economy. International Finance and Banking, 3 (1), ISSN 2374-2089.
3. Furuoka, F. (2007). Does the “Phillips curve” really exist? New empirical evidence from Malaysia.
Economics Bulletin, 5(16), 1-14.
4. Lucas, Robert E. (1973). Some international evidence on output-inflation tradeoffs.American
Economic Review, 63, 326-44.
5. Phillips, A. W. (1958). The relation between unemployment and the rate of change of money wage
rates in the United Kingdom, 1861–1957. economica, 25(100), 283-299.
6. Rangarajan, C. (1998). Development, Inflation and Monetary Policy. India's Economic Reforms and
Development, Oxford University Press.
7. Ray, L. (2011). Estimation of Phillips curve in Indian context. International Journal of Economics &
Research, 3(2), 28-51.
8. Singh, K. B., &Kanakaraj, A. andSridevi, T. O. (2010).Revisiting the empirical existence of the Phillips
Curve for India. Journal of Asian Economics, 22(3), 247-258.
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