Regression Model Inflation and Unemployment in China Data Analysis Chapter

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China: Inflation and Unemployment Correlation

Is there a trade-off between inflation and unemployment? The answer, if we look at the monthly statistics of China's Inflation and employment rate, appears to be yes. However, it is not necessarily a fool-proof formula. For the most part, unemployment and lack of money seems to trigger inflation. This is because when there is less money in the economy, often time the government will try to stimulate the economy by printing more money. However, the extra printing of money does not necessarily make it worth more, and if money continues to leave the economy even if more is being printed, the result is increased inflation. China's employment rate has grown as its inflation rate has skyrocketed. The employment rate, however, has not grown as fast as inflation nor has it shown itself to be as foolproof of an equation as the Phillips' curve. While there is an obvious correlation (the figures below demonstrate how inflation and employment seem to increase together), the predictors are still not necessarily standardized. This answers the question why there seems to be no fool-proof response to an economic decline. As much mathematical information as we have to try and make future predictions, economists are still not always correct. However, one trend does seem to be set in stone here: as long as inflation continues to increase, unemployment probably will also, and vice versa. Both need to be stopped in order for both numbers to decline.

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The numbers seem to work hand in hand, both affecting the other; therefore, both needs to be addressed to make both of these statistical inferences decrease.

Inflation and Unemployment: Phillips Curve

Explanation: Up to Down, Inflation

Left to Right: Unemployment

Statistical variables R. squared = .2, variable; 3, mean, 1.2

For the concrete data set, the Phillips Curve demonstrates that there is a push-pull relationship between inflation and unemployment; both issues seem to feed off of each other. The demonstration of R. squared at .2, the variable and the mean noted above help to demonstrate this.

Year

Unemployment rate

Inflation

Monthly Figures -- Unemployment/Inflation

1980

4.9

-15.67

Jan 4 / -15 Feb 4.2 / -15 Mar 4.3 / -15 Apr 4.4 / -15/6 May 4.6 / -15.7 June 4.6 / -15. 2 July 4.7/-16 Aug 4.4/-15.67 / Sept 4.6-15.6 / Oct 4.4 / -16 Nov 4.2 / -15.6 Dec. 4.1 / -15.6

1981

3.8

-22.45%

Jan 3.8 / -22.45 Feb3.8 / -22.5 Mar 3.9 / -22.8 Apr 3.8 / -22.45 May3.8 / -21.45 Jun 3.9 / -22.5 Jul 3.8 / -22.45 Aug 3.7 / -22.45 Sept3.9 / -22.45 Oct 3.7 / -22.45 Nov 3.8 / -22.5 Dec 3.8 / -22.45

1982

3.2

-15.79%

Jan 3.2 / -15.79 Feb3.2 / -15.79 Mar 3.3 / -15.79 Apr3.2 / -15.79 May 3.2 / -15.79 Jun 3.3 / -15.7 Jul 3.2 / -15.79 Aug3.2 / -15.9 Sept 3.2 / -15.9 Oct 3.2 / -15.79 Nov3.3 / -15.79.....

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