The Long-Run Determinant of Inflation in Malaysia: A Philips Curve Review
European Journal of Molecular & Clinical Medicine,
2020, Volume 7, Issue 11, Pages 4549-4563
Abstract
Inflation is a critical element of the market economy, where instability in the inflation rate consequently affects the cost of living index. This paper aims to check the Phillips curve's long-term efficacy by using unemployment as a long-term determinant of inflation in Malaysia; Empirical data is obtained between 1991 and 2018. The ARDL bound test cointegration and ECT b[1]used ARDL model is used to test the long-run Granger movement, and the Wald test is used to demonstrate short-run causation. consequently, the statistics significantly verified the long-term inverse causative association, running from UNE to INF. Nevertheless, the study accepted the null hypothesis that the short-term association does not exist between UNE and INF. The results are broadly in line with several Phillips Curve theory literature.
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