The Flattening Phillips Curve：Inflation-Unemployment Trade-Off and Forecast

• Main Authors: Yun-Chen Ho, 何芸臻
• Other Authors: Chia-Lin Chang
• Format: Others
• Language: zh-TW
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/55871860069431913388

碩士 === 國立中興大學 === 應用經濟學系所 === 99 === Price stability and full employment are the two major economic goals for the economic policy makers. Phillips curve is the most commonly used method to analysis between inflation and unemployment trade-off relationship. In recent years, because of emerging countries economic take-off, and increase demand for crude oil and raw materials lead to global inflation. Taiwan is a small open economy, and domestic prices are vulnerable to import prices. Additionally, due to industry relocation and the global economic recession, unemployment rates increase year by year. Therefore, we attempt to construct both original Phillips curve model and the expansion Phillips curve model, and use Rolling regression analysis. We want to identify whether the Taiwan''s Phillips curve trend change over time, and forecast inflation by using out-of-sample forecasting. The results indicate Taiwan''s Phillips curve is a negative slope, and verifying the trade-off relationship between unemployment and inflation. However, Taiwan''s Phillips curve shows a flat trend over time, it means inflation and unemployment rate trade-off relationship decline. When the Central Bank maintains price stability, may lead to significant increase in the unemployment rate and the cost of policies. In order to achieve the policy objectives, we recommend Central Bank takes Phillips curve flattening phenomenon into consideration when implement monetary policy, and could adopt other monetary tools to reduce the cost of policy implementation.