An Empirical Study On Phillips Curve, New Evidence From Iraq

Abstract

The research aimed to analyze the relationship between unemployment and inflation, what are their effects on the Iraqi economy and the extent to which general economic policy contributes to reducing inflation and unemployment rates. The research used time series data from 2000 - 2022, as well as conducting Unit root analysis to detect the general trend phenomenon in the data and the regression relationship according to the Dynamic Ordinary Least Square - DOLS method to estimate Phillips relationship, in addition to cointegration analysis according to the Engel-Granger methodology. The research concluded that the aforementioned relationship is absent in the Iraqi economy, as the result the unemployment coefficient is insignificant and the t* value is -0.7. While the results of the cointegration analysis proved that the relationship was exist according to the Engle-Granger and Phillips-Ouliaris tests, at the level of 10% and 5%, respectively, the research recommended reassessment  of the government’s economic policy and giving the private sector an opportunity to take its role in employment and growth with respect of prices level, as well as understanding the reciprocal relationship gives the opportunity to maneuver and make comprehensive political decisions.