The relationship between inflation and unemployment in USA

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.