Inflation, Unemployment and NAIRU Estimate in Indonesia: Phillips Curve Approach

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Published Dec 27, 2018
DOI https://doi.org/10.28934/ea.18.51.34.pp24-32

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Nurul Hafnati
University of Syiah Kuala, Faculty of Economic and Business, Banda Aceh, Aceh, Indonesia
Sofyan Syahnur
University of Syiah Kuala, Faculty of Economic and Business, Banda Aceh, Aceh, Indonesia

Abstract

The present study was carried out to analyze the relationship between inflation and unemployment in NAIRU estimate in Indonesia through Phillips curve approach during 25 years data from 1991-2016. The analysis model used in this research was Vector Error Correction Model (VECM) as attempts to determine the long run and short run relationships between inflation and unemployment matters in Indonesia. The results of Granger causality test indicated two-way relationship between inflation and unemployment in Indonesia. The formulated results on long run estimate pointed out that unemployment delivered negative and significant effects on inflation. Nonetheless, Wald Test designated that there was a short run relationship between inflation and unemployment

Article Details

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Vol 51 No 3-4 (2018): Economic Analysis
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Articles
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