Abstract
Research background: Unemployment and inflation are among the basic macroeconomic indicators of the national economy. Both these phenomena are inextricably linked to market economy and have undisputable social and economic impacts on the population of the countries where these processes take place. The relationship between the inflation and unemployment can be expressed by means of Philips curve. Purpose: The objective of the research is to compile Philips’s curve for the years 2000-2021 and compare the resulting curve with the initial short-run Philips curve. Methods: The validity of the mutual relationship between unemployment and inflation is examined using the method of neural networks. The data on inflation and unemployment rate are available from the period of 31 January 2020 and 28 February 2021. The data on inflation were obtained from the database of the Czech Statistical Office; the data on unemployment, from the official websites of the Czech National Bank. Findings & Value added: During the period under review, unemployment rate and inflation fluctuated constantly. Currently, both variables have stabilized at around 3%. Compared the long-term trend, in the years 2008-2009, the inflation rate was higher than unemployment rate. The analysis performed shows that the actual Philips curve for the Czech Republic in the period under review does not copy the initial short-run Philips curve, which indicates that the prediction of inflation rate development cannot be based on the development of unemployment rate, and the development of inflation rate cannot be a basis for exact prediction of unemployment rate development.
Highlights
Unemployment and inflation are among the basic macroeconomic indicators of the national economy
The results show a long-term asymmetry, since inflation in Estonia and Lithuania responds more significantly to positive changes in the output gap, whilst negative changes in unemployment show a stronger long-term impact on inflation in all three countries
Inflation was not stable either throughout the period under review, being lower at the beginning than at the end, though the difference is noticeably smaller than it was in the case of unemployment
Summary
Unemployment and inflation are among the basic macroeconomic indicators of the national economy. Both of them are inextricably linked to the market economy and have clear social and economic consequences for populations of countries where such processes occur. Unemployment and inflation directly affect purchasing power and the social status of an individual. Haskova et al (2019) state that unemployment has an impact on individuals as well as society. Considering an individual, the impact is economic consisting in the loss of regular income for the unemployed, and for their families. The impact is economic, where the unemployed do not pay taxes to the state budget and yet draw funds in the form of social benefits. That is reflected in a certain quality decrease of society due to degrading human capital and growing social problems
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