The Phillips Curve in Bulgaria: Is the Trade-Off between Inflation and Unemployment Possible?

Abstract

The objective of this paper was to estimate the inflation-unemployment nexus and the opportunities for inflation-unemployment trade-off in Bulgaria. An ordinary least squares (OLS) regression of annual time series data for the period 2003-2022 was employed to test the Phillips curve hypothesis for Bulgaria. The results from the empirical analysis showed that: (i) a negative relationship (both linear and non-linear) exists between inflation and unemployment in Bulgaria; (ii) Bulgarian policy makers can decrease inflation by three percent at the cost of one percent increase in unemployment by implementing restrictive macroeconomic policies.