Analysis identifies weak negative ties between GDP and unemployment, revealing monetary policy must align with fiscal actions to tackle economic downturns.
Key Points
To assess the robustness of the Phillips Curve using Vector Autoregression Models in the context of economic crises.
Utilized Vector Autoregression Models to analyze relationships among inflation, unemployment, GDP, and interest rates.
Employed unit root tests and cointegration tests to ensure data stationarity and long-term relationships.
Conducted impulse response function analysis to examine the dynamic responses of macroeconomic variables.
Found a negative correlation between GDP and unemployment, which weakened during financial crises and was temporary.
Indicated that monetary policy alone was inadequate during downturns, necessitating coordinated policy approaches.
Revealed inflation did not conform to the Phillips curve during crises due to delayed responses to economic shocks.