Phillips Curve (Struggling Jargon): Practical Implication in Indian Context

Abstract

Inflation and Unemployment are two intricately linked concepts of Economics. The renowned economist William Phillips, described an inverse relationship between rates of unemployment and corresponding rates of rises in wages resulting within an economy. Over the years many researchers have tried to test the validity of Phillips Curve over various areas. Current research tries to find out the empirical relationship between Inflation and unemployment by testing of Phillips Curve in Indian context. To test the operation of Phillips curve in current Indian economic situation the data of twenty seven years i.e. 1992 to 2018 have been taken into consideration. To check the applicability of already existing theory of inverse relationship between Unemployment and Inflation, researchers have applied Co-integration and Granger Causality Test.

Keywords: Phillips curve, Inflation, Unemployment, granger causality, co- integration

JEL Classification: E31, E32, E52, E58