Journal of
Economics and International Finance

  • Abbreviation: J. Econ. Int. Finance
  • Language: English
  • ISSN: 2006-9812
  • DOI: 10.5897/JEIF
  • Start Year: 2009
  • Published Articles: 312

Article in Press

THE SHORT AND LONGRUN PHILIPS CURVES: WHAT IS KENYA’S NON-ACCELARATION RATE OF UNEMPLOYMENT?

GEORGE KIPNGETICH KOSIMBEI

  •  Received: 14 June 2018
  •  Accepted: 14 June 2018
This study estimated the short and longrun Phillips curves for Kenya. The non- accelerating inflation rate of unemployment (NAIRU) was also estimated and the Lucas critique tested to prove whether it is evident in Kenyan data. This study was necessary since the Kenyan rates of inflation and unemployment were both simultaneously high contrary to what Phillips curve theory explains. Using secondary data covering 1977 to 2015, a causal research design employing the Ordinary Least Squares method to estimate the shortrun and longrun Phillips curve equations. The same method was also used to calculate an estimate of the non accelerating inflation rate of unemployment equation and by use of a special formula, NAIRU estimate was calculated. The results established that the Lucas critique is evident in Kenyan data and that the negative relationship both in the short and longrun between inflation and unemployment was not significant. The estimated NAIRU in Kenya was found to be 8.699 percent.

Keywords: Inflation, Unemployment, Phillips curve, Lucas critique and the NAIRU.