The impact of the inflation and unemployment values from the previous period on the Phillips curve

Abstract

The article deals with formulation of a dynamical model which expresses the relationship between the rate of inflation and the rate of unemployment more accurately and which has become to be known as the Phillips curve. The original classic model of the relationship between the rate of inflation and the rate of unemployment which led to the Phillips curve has been replaced, in this article, by a new model expressing the real economic situation more precisely while respecting the influence of the history of the factors taken into account using so-called delay differential equations. The article also looks into the impact of the delay interval’s length and the impact of inflation and unemployment values from the previous period.