Abstract
In this research, we invoke linear and logarithmic regression models to empirically test the validity of the Short-run Phillips curve for Namibia by relying on macroeconomic time-series data running from 1991 to 2005.Our results offer some support for the presence of the phenomenon of stagflation in Namibia. This is rather contradictory to the underlying philosophy of the original Phillips curve. In the light of the outcome of the investigation anti-inflation cum unemployment measures are suggested. Further studies focussing on the applicability of the Phillips curve to the economy of Namibia is strongly recommended.
Highlights
The Phillips curve represents one of the most surprising discoveries and controversial relationships in economic literature
The original version of the Phillips curve relates the rate of increase of wages to unemployment, subsequent studies have substituted wages with inflation
The two oil price shocks of 1973-1974 and 1979-1980[3], which resulted in periods of increased inflation that were not associated with falling unemployment provoked scholars to further question the stability as well as the relevance of the Phillips curve
Summary
The Phillips curve represents one of the most surprising discoveries and controversial relationships in economic literature. In 1958 Phillips[1] using data based on the United Kingdom for the years 1861 to 1957 tried to investigate the relationship between unemployment rates and changes in wage rates. The Phillips curve can be interpreted as a trade-off between inflation and unemployment. It suggested that policymakers could choose different combinations of unemployment and inflation. The Phillips curve was very popular in the 1960s but fell apart afterwards. The two oil price shocks of 1973-1974 and 1979-1980[3], which resulted in periods of increased inflation that were not associated with falling unemployment provoked scholars to further question the stability as well as the relevance of the Phillips curve
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