The relationship between the inflation rate and the unemployment rate in Poland and their long-term associations with selected macroeconomic variables

Jan Koterwa (), Hubert Kycia () and Anna Czapkiewicz ()
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Jan Koterwa: AGH University of Krakow, Krakow, Poland
Hubert Kycia: AGH University of Krakow, Krakow, Poland
Anna Czapkiewicz: AGH University of Krakow, Krakow, Poland

Managerial Economics, 2023, vol. 24, issue 2, 165-185

Abstract: The purpose of this paper is to examine the relationship between the inflation and unemployment rates in Poland and to analyze their long-term relationships with selected macroeconomic variables: the WIG20 index, consisting of the 20 largest Polish companies noted on Warsaw Stock Exchange, the USD/PLN exchange rate, the Brent crude oil index, and the interest rate on 10-year government bond yields. The main objective of the study is to determine the relationship between inflation and unemployment. In this study, a vector error correction model (VECM) was used to study long-run dependence. The impulse response function and forecast error variance decomposition were also used to examine the interactions between variables. There is one long-run relationship between the factors studied. Both the values of the VECM model parameters and the results of the impulse response function indicate that there is a negative relationship between inflation and unemployment in the short term. In the long term, there is a positive relationship, resulting in the stagflation phenomenon.

Keywords: VECM; inflation; unemployment; impulse response function; variance decomposition; cointegration (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:agh:journl:v:24:y:2023:i:2:p:165-185

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