The Phillips Curve and the Global Financial Crisis : A study on the Nordic countries from 1999 to 2016

• Main Authors: Lepa, Henri, Pham, Linh Dieu
• Format: Bachelor Thesis
• Language: English
• Published: Internationella Handelshögskolan, Högskolan i Jönköping, IHH, Nationalekonomi 2018
• Subjects: Unemployment; inflation; Phillips Curve; economic crisis; Global Financial Crisis; Nordic countries; Economics; Nationalekonomi; Norway; Iceland
• Online Access: http://urn.kb.se/resolve?urn=urn:nbn:se:hj:diva-40399

This paper examines the effects of the Global Financial Crisis on the relationship between unemployment and inflation rate through the Phillips Curve in five Nordic countries: Denmark, Finland, Iceland, Norway and Sweden, from 1999 to 2016. The Nordic countries are quite unique in the world, as they are all economically and culturally connected to each other, which allows us to analyse how the crisis affected them differently. The foundation of our research is the Phillips Curve, which shows an inverse relationship between unemployment and inflation. By using the two-way fixed effects model, we have investigated whether the Phillips Curve and the relationship still holds during the time of the crisis for the Nordic countries. The results have shown that the relationship has changed during the crisis period, which might be due to the unemployment shock and the low targeted inflation rate.