UNEMPLOYMENT AND INFLATION RATES IN THE YEARS OF ECONOMIC TURBULENCES OR DO THE PHILLIPS CURVE RELATIONSHIPS STILL HOLD?

The Phillips curve is a well-known and widely discussed notion. This relationship between the unemployment and inflation rates was quickly transferred from the area of economic theory to the practice of economy, that is, of central banks. However, it has been gradually discovered that this relationship only expresses economic interdependence at a certain moment of time and a certain point in space. New economic phenomena raise doubts about its validity on not only the long-term, but even the short-term scale. From the viewpoint of statistics, each statistically proven relationship is only valid in the given time and space and cannot be mechanically applied under different conditions. This relationship is also statistically dubious regarding the independent and dependent variables. This paper points out certain statistical ambiguities related to applications of the Phillips curve and provides a test of significance for a set of 30 countries in the period from 2003 to 2014 to show that the inflation rate only weakly responds to changes in the unemployment rate; that is, the Phillips curve relationships are not valid.