Correlational analysis of inflation and unemployment in Ukraine and the countries of the European Union

Abstract

The article researches the correlation between inflation and unemployment in Ukraine and in some countries of the European Union. At the same time, the method of correlation-regression analysis of indicators for the last three years was applied. The content of the concepts of unemployment and inflation and their main causes are considered. Different types of inflation are studied in view of their impact on the level of unemployment in the economy. The classification of types of unemployment and the method of calculating its level are disclosed. The historical genesis of the concepts of inflation and unemployment and the historical perspective of the formation of an inverse relationship between these two indicators are described. In the middle of the last century, the inverse relationship between inflation and unemployment was very clear, with statistical data providing convincing evidence of the validity of the Phillips curve. This allowed for effective economic management, as low unemployment was sustainable as long as higher inflation was tolerated. In the 1970s, this relationship was somewhat broken, as the data did not provide clear evidence of the relationship between inflation and unemployment. This period was characterised by high inflation and high unemployment and was called the period of stagflation. In 2000, there was a surge in unemployment, and the relationship between inflation and unemployment again resembled the Phillips curve, but to a much lesser extent. Finally, the unemployment rate declined between 2012 and 2019, and inflation remained low during this period. This indicates that the relationship between inflation and unemployment may not be as close as previously thought. The main purpose of this article is to study the relationship between the analysed indicators over the last three years. The analysis was carried out using the correlation-regression analysis method based on the data of the official statistical website of the European Union - Eurostat - and the State Statistics Committee of Ukraine. The analysis was made for the following countries: Ukraine, Hungary, Slovakia and Germany. Inflation and unemployment rates are illustrated and explained in the form of charts. Based on the data, a functional graph was prepared for each country, which determines the form of the established regression formulas. As a conclusion, it can be said that after the calculations, the results show that the correlation between inflation and unemployment is moderate in Ukraine, weak in Hungary, remarkable in Slovakia, and strong in Germany.