The Phillips Curve for the Romanian Economy, 1992-2017
The Phillips Curve for the Romanian Economy, 1992-2017

Summary/Abstract: The paper analyses the relationship between the unemployment rate and inflation, in Romania, during the 1992 – 1997 (March) period. For this purpose, we have estimated two econometric models, where the inflation trend has considered as a benchmark for inflation dynamics and the unemployment gap was built after applying the Hodrick-Prescott (HP) filter at unemployment rate. We have found that the unemployment gap had the greatest relevance in inflation model if we have taken a four months delay. The data support the hypothesis of a significant relationship between inflation and unemployment, with the shape described by the Phillips curve, namely the coefficients of unemployment gap were negative, econometrically significant and comparable as dimension in both models of inflation dynamics. We have calculated that the coefficient of unemployment gap is -0.344 in the Phillips curve model where the errors follow an ARMA(2, 2) process and -0.386 in the model which includes the inflation inertia.

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