In: Economics
The authors claim that national data are unlikely to provide evidence for or against a Phillips Curve. Carefully explain why this is (in your own words, of course).
An inverse relationship among inflation and unemployment with in an economy is referred to as Philips curve .
once a mobile central bank is included in the analysis, we can clearly notify that national data comprising unemployment and inflation are not helpful for identifying whether a Philips curve connection exists or not. we prefer regional data on inflation and unemployment to account for the problems faced by a central bank.
Philips curve is suggested as a helpful connection because the key measures of economic performance are inflation and unemployment.
Modern Philips curve states that the inflation is controlled mainly by three forces
* Expected inflation
* Unemployment deviation from its natural rate
*Supply shocks
So from data analysis, we can say that approximations of Philips curve trade off are balanced within the same multidecade period and provides a compatible negative relationship with regional unemployment and inflation.
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