Testing Phillips Curve For Serbian And Romanian Economy

Abstract

The subject of this work is the Phillips curve paradigm in macroeconomics with an emphasis on its development in New Keynesian theory. The main objective of the work is to reach scientifically relevant and practically useful knowledge on the concept of the Phillips curve and development its application to the related macroeconomic variables in Serbia and Romania. The dependence between inflation and unemployment rate will be analysed on empirical data were chosen in Romania and Serbia using Bayesian linear regression models. For this study, these two countries which experienced a period of transition were chosen. Furthermore, Serbia aspires to join the EU, while Romania has been its member since 2007. The results of this paper will show that the model of traditional Phillips curve exists only in the short term.

Keywords

• hillips curve
• unemployment
• gdp deflator
• bvar models