How do the Eurozone's Beveridge and Phillips curves perform in the face of global economic crisis?

Abstract

Abstract.In the light of criticism of the failure of “mainstream” economics to predict and avert the global financial and economic crisis, the authors use panel data on 11 Eurozone countries for the period 2007–10 to investigate how two of the “traditional” tools of labour economics and macroeconomics – the Beveridge and Phillips curves – perform empirically under the “stress test” of global economic crisis. After confirming the reliability of these textbook relationships between unemployment and vacancy ratios, and unemployment and inflation, respectively, they explore the correlation between inflation and vacancies. Their findings on all three relationships highlight the complementarity of supply‐side and demand‐side policies to reduce unemployment.