Abstract

Forecasting inflation with Phillips Curve is an important argument for policy makers. However, especially during periods of increased long-term unemployment, it is assumed that trade-off between unemployment and inflation has weakened. After 1980 and the global economic crisis in 2008, in many developed OECD countries, long-term unemployment tend to increase and began to be permanent. So about the prediction of inflation with Phillips Curve accurately, it is very crucial decision to use short-term or long-term unemployment in Phillips Curve. In this study, in Turkey during 2000-2013, it was compared to performance of forecast of inflation by triangle model in which using separately sort-term unemployment rate, total rate of unemployment and mean rate of unemployment. The criterion used in the comparison is the root means square error approach. As a result, total rate of unemployment in which short and long-term unemployment have equal weight gives more efficient results on forecast to inflation with Phillips Curve.

Key words: Phillips Curve, Long-Term Unemployment, Triangle Model. JEL Classification: C22, E31, E50, J64.

Article Language: EnglishTurkish