Phillips curve has raised heated discussions in the past few decades since
Phillips initially introduced it in 1958. This article examines the Phillips
curve's existence and stability using the USA time-series data of inflation
and unemployment. First of all, the Phillips curve's status quo will be
discussed, along with our motivation to study this. Next, the literature
review will be carried out to present the related study of the Phillips curve
since the last century, and an explanation will be given as to why the Phillips
curve failed to function during the 1970s. Later on, drawing upon the
quarterly data from 1980 to 2019, which is derived from the FRED
database, the VECM model will be carried out in the empirical part. It is
found that the inflation and unemployment were both affected by the
lagged values, and they experienced a short-run adjustment as they turned
out to diverge from the original points. Simultaneously, these divergences
were pulled back by the system to reach an equilibrium in the long-run.
Citation:
Liu, X., & Almeida, H.F. (2020). The relationship between inflation and unemployment in USA. ASERC Journal of Socio-Economic Studies, 3(2), 48-59. DOI:10.30546/2663-7251.2020.3.2.48