The relationship between the inflation rate and the unemployment rate in the areas of the Palestinian National Authority Standard Study for the period (1997-2019)

Abstract

This study discusses the problems of both unemployment and inflation in the areas of the Palestinian National Authority, compare with the West Bank and the Gaza Strip separately, during the period (1997-2019). This study aims to show the strength of connection between unemployment and inflation in whole Palestinian economy, and the economy of both the West Bank and Gaza Strip, separately, highlighting the results of the most important statistical tests (F, T, DW, ARCH, LM, Godfrey Breusch- Pagan, White) between unemployment and inflation in the Palestinian economy as one unit, compared to the economies of the West Bank and Gaza Strip separately. This study measuring the surprising effect of the “Granger” causality between unemployment and inflation on the Palestinian economy as one unit; compare to the economies of the West Bank and Gaza Strip separately. The study found the possibility of applying the Phillips curve to the Palestinian economy in general, and both parts of the West Bank and Gaza Strip, and the existence of the inverse relationship between inflation rates and unemployment rates. The cost of reducing unemployment is a very high inflation rate. The inflation situation in the Palestinian economy in general, and in both parts of the West Bank and Gaza Strip, is based on the superiority of aggregate demand (AD) over the overall supply (AS) of goods and services needed by members of the Palestinian community.