THE RATIONAL ANTICIPATIONS REGARDING”INFLATION - UNEMPLOYMENT” TRADE-OFF

Monica Florica Dutcas
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Monica Florica Dutcas: Centre for Financial and Monetary Research “Victor Slavescu”, N.I.E.R., Romanian Academy, Bucharest, Romania

Journal of Financial and Monetary Economics, 2018, vol. 6, issue 1, 55-62

Abstract: The paper starts from the premise that rational expectations theory invalidates the Philips Curve by demonstrating that monetary policy is long-term ineffective in terms of unemployment. The argument of the paper is the need to evaluate the trade-off inflation unemployment in the literature and how it verifies the precision of the Philips Curve model for better prediction of inflation and unemployment and their relationship. Identifying the Philips Curve is important when designing macroeconomic policy strategies on inflation, unemployment, economic growth, the shape of the curve being crucial to the direction of economic policy. Inflation and unemployment are structural components of market economy, each of them constitutes dangerous macroeconomic dis-equilibriums, and in the Romanian economic evolution, in certain periods, we can consider that each of them exhibited major threats for development and progress. Some conclusions are presented regarding the data which verify the short term Philips Curve model precision in order to show the signification of the relationship between inflation and unemployment on 1990 – 2017 period for Romania and the possible consequences on the strategic macroeconomic policies.

Keywords: Rational expectations Theory; Philips Curve Model; inflation; unemployment; Romania (search for similar items in EconPapers)
JEL-codes: C01 E24 E31 (search for similar items in EconPapers)
Date: 2018
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