Phillips Curve in Self-management Socialism of Yugoslavia
Session
Management, Business and Economics
Description
Inflation and unemployment were two of the main issues that plagued the Socialist Federal Republic of Yugoslavia (SFRY) from 1965 to her disintegration. Economic history has taught us that uncontrolled inflation is a characteristic of the countries with a lack of democracy, but SFRY was more economically liberal and decentralized than any other communist country. Using the World Bank annual data from 1965 to 1990 for unemployment and inflation, the OLS (Ordinary Least Squares) findings demonstrate that unemployment is significant and positively affects the inflation rate, which stands against the theoretical paradigms known as the Phillips curve. The impulse response function (IRF) indicates that the positive shock of unemployment positively affects inflation in the short run. The Johansen test reports that unemployment and inflation were integrated into the short-run confirming the expectations-augmented Phillips curve. Moreover, contrary to theoretical expectations is the cointegration in the long run where the relationship between inflation and unemployment rate turned into an upward steeper slope. To this end, the results help the scholars to be informed on the historical relationship between inflation and unemployment in the context of SFRY, a formerly communist country with a differentiated economic model. The relevance of our findings goes beyond economic concepts by understanding them as one of the main factors contributing to the bloody disintegration of the SFRY.
Keywords:
SFRY, self-management socialism, inflation, unemployment, Phillips curve.
Proceedings Editor
Edmond Hajrizi
ISBN
978-9951-550-47-5
Location
UBT Kampus, Lipjan
Start Date
30-10-2021 12:00 AM
End Date
30-10-2021 12:00 AM
DOI
10.33107/ubt-ic.2021.501
Recommended Citation
Aliu, Florin; Mulaj, Isa; and Matoshi, Ruzhdi, "Phillips Curve in Self-management Socialism of Yugoslavia" (2021). UBT International Conference. 524.
https://knowledgecenter.ubt-uni.net/conference/2021UBTIC/all-events/524
Phillips Curve in Self-management Socialism of Yugoslavia
UBT Kampus, Lipjan
Inflation and unemployment were two of the main issues that plagued the Socialist Federal Republic of Yugoslavia (SFRY) from 1965 to her disintegration. Economic history has taught us that uncontrolled inflation is a characteristic of the countries with a lack of democracy, but SFRY was more economically liberal and decentralized than any other communist country. Using the World Bank annual data from 1965 to 1990 for unemployment and inflation, the OLS (Ordinary Least Squares) findings demonstrate that unemployment is significant and positively affects the inflation rate, which stands against the theoretical paradigms known as the Phillips curve. The impulse response function (IRF) indicates that the positive shock of unemployment positively affects inflation in the short run. The Johansen test reports that unemployment and inflation were integrated into the short-run confirming the expectations-augmented Phillips curve. Moreover, contrary to theoretical expectations is the cointegration in the long run where the relationship between inflation and unemployment rate turned into an upward steeper slope. To this end, the results help the scholars to be informed on the historical relationship between inflation and unemployment in the context of SFRY, a formerly communist country with a differentiated economic model. The relevance of our findings goes beyond economic concepts by understanding them as one of the main factors contributing to the bloody disintegration of the SFRY.