Analyzing the Relationship Between Inflation and Unemployment in Afghanistan (2003-2021)
Corresponding Author(s) : Ehsanullah Saad
Journal of Social Sciences & Humanities,
Vol. 2 No. 1 (2025): January
Abstract
Inflation and unemployment are two key elements in any market economy, and their relationship significantly impacts socio-economic conditions. This study examines the connection between Afghanistan's unemployment and inflation, providing crucial information for macroeconomic policymakers. The study explores the applicability of the Phillips Curve in Afghanistan's specific economic context. This study employs the Ordinary Least Squares (OLS) method to analyze data gathered from 2003 to 2021, aiming to identify patterns and relationships that may guide economic policy decisions. The results indicate a positive relationship between inflation and unemployment. However, this relationship is statistically insignificant, and there is no proof to substantiate the presence of a Phillips Curve in Afghanistan. This lack of alignment with traditional economic models underscores the necessity for tailored economic policies to address the specific challenges faced by the Afghan economy. The study highlights the importance of understanding local economic dynamics and suggests that policymakers should explore alternative approaches to managing inflation and unemployment, ultimately fostering sustainable economic growth.
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- Alisa, M. (2015). The Relationship between Inflation and Unemployment: A Theoretical Discussion about the Philips Curve. Journal of International Business and Economics, 3(2). https://doi.org/10.15640/jibe.v3n2a7
- Friedman, M. (1968). The role of monetary policy American Economic Review (1968) 58, March, Link
- Fuller, E. W. (Ed.). (2020). David Hume: Of Money (1752). In A Source Book on Early Monetary Thought. Edward Elgar Publishing. https://doi.org/10.4337/9781839109997.00039
- Furuoka, F. (2007). Does the “Phillips Curve” Really Exist? New Empirical Evidence from Malaysia. Economics Bulletin, 5(16), 1–14. http://economicsbulletin.vanderbilt.edu/2007/volume5/EB-07E20006A.pdf
- Furuoka, F., Munir, Q., & Harvey, H. (2013). Does the Phillips curve exist in the Philippines? Economics Bulletin, 33(3), 2001–2016. https://ideas.repec.org//a/ebl/ecbull/eb-12-00496.html
- Galı́, J., & Gertler, M. (1999). Inflation dynamics: A structural econometric analysis. Journal of Monetary Economics, 44(2), 195–222. https://doi.org/10.1016/S0304-3932(99)00023-9
- Harrell, F. E. (2015). Regression Modeling Strategies: With Applications to Linear Models, Logistic and Ordinal Regression, and Survival Analysis. Springer International Publishing. https://doi.org/10.1007/978-3-319-19425-7
- Harris, R. I. D. (1992). Testing for unit roots using the augmented Dickey-Fuller test. Economics Letters, 38(4), 381–386. https://doi.org/10.1016/0165-1765(92)90022-Q
- Phillips, A. W. (1961). A Simple Model of Employment, Money and Prices in a Growing Economy. Economica, 28(112), 360. https://doi.org/10.2307/2601407
- Karanassou, M., & Sala, H. (2009). The US Inflation-Unemployment Tradeoff: Methodological Issues and Further Evidence. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1426739
- Kitov, I., & Kitov, O. (2013). Inflation, unemployment, and labor force. Phillips curves and long-term projections for Japan (Version 1). arXiv. https://doi.org/10.48550/ARXIV.1309.1757
- Lucas, R. E. (1996). Nobel Lecture: Monetary Neutrality. Journal of Political Economy, 104(4), 661–682. https://doi.org/10.1086/262037
- Niskanen, W. A. (2002). On the Death of the Phillips Curve. Cato Journal, 22, 193. https://heinonline.org/HOL/Page?handle=hein.journals/catoj22&id=197&div=&collection=
- Phillips, A. W. (1961). A Simple Model of Employment, Money and Prices in a Growing Economy. Economica, 28(112), 360. https://doi.org/10.2307/2601407
- Reichel, R. (2004). On the Death of the Phillips Curve: Further Evidence 24 Cato Journal 2004. https://heinonline.org/HOL/LandingPage?handle=hein.journals/catoj24&div=31&id=&page=
- Ribba, A. (2015). What Drives US Inflation and Unemployment in the Long Run? https://iris.unimore.it/handle/11380/1292906
- Samuelson, P., & Solow, R. (1960). Analytical Aspects of Anti-Inflation Policy on JSTOR. https://www.jstor.org/stable/1815021
- Touny, M. A. (2013). Investigate the Long-Run Trade-Off between Inflation and Unemployment in Egypt. International Journal of Economics and Finance, 5(7), p115. https://doi.org/10.5539/ijef.v5n7p115
- Zhang, C., Osborn, D. R., & Kim, D. H. (2008). The New Keynesian Phillips Curve: From Sticky Inflation to Sticky Prices. Journal of Money, Credit and Banking, 40(4), 667–699. https://doi.org/10.1111/j.1538-4616.2008.00131.
References
Alisa, M. (2015). The Relationship between Inflation and Unemployment: A Theoretical Discussion about the Philips Curve. Journal of International Business and Economics, 3(2). https://doi.org/10.15640/jibe.v3n2a7
Friedman, M. (1968). The role of monetary policy American Economic Review (1968) 58, March, Link
Fuller, E. W. (Ed.). (2020). David Hume: Of Money (1752). In A Source Book on Early Monetary Thought. Edward Elgar Publishing. https://doi.org/10.4337/9781839109997.00039
Furuoka, F. (2007). Does the “Phillips Curve” Really Exist? New Empirical Evidence from Malaysia. Economics Bulletin, 5(16), 1–14. http://economicsbulletin.vanderbilt.edu/2007/volume5/EB-07E20006A.pdf
Furuoka, F., Munir, Q., & Harvey, H. (2013). Does the Phillips curve exist in the Philippines? Economics Bulletin, 33(3), 2001–2016. https://ideas.repec.org//a/ebl/ecbull/eb-12-00496.html
Galı́, J., & Gertler, M. (1999). Inflation dynamics: A structural econometric analysis. Journal of Monetary Economics, 44(2), 195–222. https://doi.org/10.1016/S0304-3932(99)00023-9
Harrell, F. E. (2015). Regression Modeling Strategies: With Applications to Linear Models, Logistic and Ordinal Regression, and Survival Analysis. Springer International Publishing. https://doi.org/10.1007/978-3-319-19425-7
Harris, R. I. D. (1992). Testing for unit roots using the augmented Dickey-Fuller test. Economics Letters, 38(4), 381–386. https://doi.org/10.1016/0165-1765(92)90022-Q
Phillips, A. W. (1961). A Simple Model of Employment, Money and Prices in a Growing Economy. Economica, 28(112), 360. https://doi.org/10.2307/2601407
Karanassou, M., & Sala, H. (2009). The US Inflation-Unemployment Tradeoff: Methodological Issues and Further Evidence. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1426739
Kitov, I., & Kitov, O. (2013). Inflation, unemployment, and labor force. Phillips curves and long-term projections for Japan (Version 1). arXiv. https://doi.org/10.48550/ARXIV.1309.1757
Lucas, R. E. (1996). Nobel Lecture: Monetary Neutrality. Journal of Political Economy, 104(4), 661–682. https://doi.org/10.1086/262037
Niskanen, W. A. (2002). On the Death of the Phillips Curve. Cato Journal, 22, 193. https://heinonline.org/HOL/Page?handle=hein.journals/catoj22&id=197&div=&collection=
Phillips, A. W. (1961). A Simple Model of Employment, Money and Prices in a Growing Economy. Economica, 28(112), 360. https://doi.org/10.2307/2601407
Reichel, R. (2004). On the Death of the Phillips Curve: Further Evidence 24 Cato Journal 2004. https://heinonline.org/HOL/LandingPage?handle=hein.journals/catoj24&div=31&id=&page=
Ribba, A. (2015). What Drives US Inflation and Unemployment in the Long Run? https://iris.unimore.it/handle/11380/1292906
Samuelson, P., & Solow, R. (1960). Analytical Aspects of Anti-Inflation Policy on JSTOR. https://www.jstor.org/stable/1815021
Touny, M. A. (2013). Investigate the Long-Run Trade-Off between Inflation and Unemployment in Egypt. International Journal of Economics and Finance, 5(7), p115. https://doi.org/10.5539/ijef.v5n7p115
Zhang, C., Osborn, D. R., & Kim, D. H. (2008). The New Keynesian Phillips Curve: From Sticky Inflation to Sticky Prices. Journal of Money, Credit and Banking, 40(4), 667–699. https://doi.org/10.1111/j.1538-4616.2008.00131.