The Robustness Check of Phillips Curve - Evidence from U.S. Economy During the COVID-19 Pandemic

Pinhsuan Chiu

Chapter 66 in Economic Management and Big Data Application:Proceedings of the 3rd International Conference, 2024, pp 747-757 from World Scientific Publishing Co. Pte. Ltd.

Abstract: In this paper, we use the Vector Autoregression (VAR) approach to examine the robustness of the Phillips Curve in the United States economy from January 2020 to June 2022. The data is characterized by VAR(4) with a cointegrating rank of 2, using the unemployment rate and sticky inflation. The Impulse Response Function (IRF) is used to examine the relationship between the unemployment rate and inflation. The Granger-causal Test results suggest that historical unemployment data is useful for improving inflation projections. With a longer prediction horizon, unemployment shocks have a greater impact on the forecast error variance of inflation. Based on the impulse response function, the Phillips Curve is not alive in the US economy during the COVID-19 pandemic, but it can still be a significant factor legitimate for the government to set economic policy.

Keywords: Big Data; Information Management; Economic; Data Applications; Blockchain; E-commerce (search for similar items in EconPapers)
JEL-codes: C63 C8 O14 (search for similar items in EconPapers)
Date: 2024
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