Phillips Curve Essay

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Mario Pacheco Statistics Prof. Dudukovic May 10, 2012 Phillips Curve Statistical analysis of data must be followed by accurately stating the conclusion without misinterpreting the results. The Phillips curve is an example of a pattern which should not be treated as an economic concept applicable to every country. “Phillips curve is a theory which states that with economic growth comes inflation, which in turn should lead to more jobs and less unemployment.” (Investopedia) A study done by Dr. Popovic confirms the theory behind the Phillips curve according to a statistical data analysis on the EU with data from 1998 to 2007. However, one study in one region of the world does not prove a concept true for the entire world. Developing countries such as Mexico and Colombia concluded a weak negative correlation and a moderate positive correlation between inflation and unemployment. Dr. Popovic’s article, Inflation and unemployment: Phillips Regularity in the EU, states: “negative linear relation between the phenomena and their moderate co-dependence.” (Popovic 2012) In a developed economy, such as the EU from 1998 to 2007, stability can be expected in addition to growth and expansion which creates jobs. As jobs are created, the population is capable of spending additional money thus rising inflation to compensate for expenditure. On the other hand, a country undergoing development is exposed to higher risks of instability due to risk factors such as: Lack of infrastructure, presence of excessive violence, exploitation from world powers, and a variety of other possible obstacles developing countries are exposed to. Consequently, economical concept such as the Phillips Curve, is not a concept which can be recognized as applicable to the world. In order to determine the applicability of the Phillips Curve to developing countries, data of Colombia’s inflation

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