Empirical Economic Bulletin, An Undergraduate Journal


This paper investigates the long-run relationship between inflation and unemployment in the economy of Malaysia between 1972 and 2004. Basing my model off of an investigation by Fair (1997), this study will attempt to quantify the relationship between inflation rates, unemployment, wage rates, changes in production, and a measure of demand pressure. Using macro-level data from various sources, it is expected that the results will suggest periods of high inflation are directly related to high unemployment, decreased wage rates, lower production levels, and substantially weak demand pressures.