The impact of inflation on unemployment in Indian economy
Ashis Kumar Mukherjee
The main aim of this study is to find out the relationship between inflation rate and unemployment rate in India from the year 1991-2017. It also aims to test for the existent of the Phillips curve in the short run as well as in the long run. The study used a model in which inflation rate and unemployment rate were the independent variable and dependent variable respectively. In order to estimate the impact of the inflation rate on unemployment rate we have planned to estimate a log linear model. To examine the long run relationship between the unemployment rate and inflation rate, we use Engle and Granger test known as co-integration. Apart from, coefficient of determination (R2), t-test, F-test, Durbin-Watson test statistic was also used. The observation from this study showed that there is an inverse relationship between inflation rate and unemployment rate in the short run but this relation breaks down in the long run. In the long run inflation rate does not control unemployment rate.