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An Econometric Analysis of Inflation and Unemployment in Lebanon: A Vector Error Correction Model (VECM)

Mohammad Khanssa, Wafaa Nasser and Abbas Mourad

International Journal of Economics and Finance, 2018, vol. 10, issue 2, 133-141

Abstract: This paper uses econometric modeling to test the nature of the relationship between unemployment and inflation in Lebanon throughout the period 1993-2014. It takes the Phillips curve relationship as a reference for the tests. Cointegration, Granger causality and VECM were used to test the relationship both in the short and in the long run. The study resulted in finding out that the Phillips curve relationship doesn¡¯t hold in Lebanon in the short run and came to a conclusion that there is a one-way causality relationship in the long run from unemployment to inflation and not in the opposite direction.

Keywords: unemployment; inflation; cointegration; Vector Error Correction Model (VECM); Granger causality (search for similar items in EconPapers)
JEL-codes: R00 Z0 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:ibn:ijefaa:v:10:y:2018:i:2:p:133-141