Application Of The Phillips Curve To The Analysis Of Economic Factors Affecting Indonesia’s Unemployment Rate

Abstract

The effect of economic variables on Indonesia's unemployment rate, including wages, inflation, and the growth of the economy, is covered in this paper. Furthermore, this research assesses evaluates the consequences of the global economic crisis in 2008, which originated in the United States and extended to other countries, including Indonesia. The purpose of this study is to analyze the impact of inflation, wages, unemployment rate, and economic growth on unemployment in Indonesia using panel data regression analysis. Research methods include the use of statistical data, theoretical analysis, and literature studies to support these arguments. This study uses regression analysis of panel data to examine how wages, inflation, unemployment rate, and economic growth affect unemployment in Indonesia. In this case, the study chose the Random Effect Model (REM) approach with the Hausman test. The outcomes indicate that inflation, wages, and economic growth significantly affect unemployment, exhibit a trade-off relationship and natural rate in line with the Phillips curve, both in the short and long term. From these findings, the research provides suggestions and policy implications for the government and related parties to improve worker welfare and reduce unemployment in Indonesia.