SHS Web Conf.
Volume 107, 20219th International Conference on Monitoring, Modeling & Management of Emergent Economy (M3E2 2021)
|Number of page(s)||5|
|Section||Innovation Models of Economic Development|
|Published online||24 May 2021|
The impact of inflation on the unemployment rate in Egypt: a VAR approach
Faculty of Management and Economics, Tomas Bata University in Zlin, nam. T.G. Masaryka 5555, 76-001 Zlin, Czech Republic
Unemployment and inflation are among the most critical phenomena facing both developed and developing countries due to their harmful social, economic, and political effects. The Egyptian monetary policy’s main objective is to maintain a low inflation rate in the medium run to keep the confidence and a high rate of investment and economic growth. At the same time, economists argue that targeting a low-rate of inflation may increase unemployment. Although the classical Philips curve indicates a trade-off between inflation and unemployment, several empirical studies have argued that the relationship between inflation and unemployment depends on the shocks’ source and lagged responses. The main objective of this paper is to examine the relationship between inflation and Egypt’s unemployment rate. We used time-series data from 1980 to 2019, where a vector autoregressive (VAR) model and the Impulse response function tool (IRF) were employed. The results show that inflation has a positive relationship with GDP while negatively affecting the unemployment rate.
© The Authors, published by EDP Sciences, 2021
This is an Open Access article distributed under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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