Statistical Analysis of the Relation between Inflation and Unemployment in Democratic States using Spearmans ? Correlation Coefficient with Application in Albania

Fejzi Kolaneci, Brunilda Hoxhalli

Abstract


The main purpose of the present study is to investigate relation between inflation
rate and unemployment rate in contemporary democratic states. Spearmans ?
correlation coefficient method is applied in our study for Albania during the period
January 2005-December 2014. Some results of the study include:
The Central Limit Theorem is not applicable for the quarterly inflation rate
as well as for quarterly unemployment rate in Albania during the period
January 2005-December 2014 at the confidence level 99.99%. The official
data for inflation and unemployment contradict the CLT at very high
confidence level 99.99%.
The inflation process in Albania during the period January 2005-December
2014 is an unfair game at the confidence level 99.2%.

The unemployment process in Albania during the period January
2005-December 2014 is an unfair game at the confidence level 99.99%.
The inflation and unemployment in Albania during the period January
2005-December 2014 are statistically dependent at the 96% confidence level.
Spearmans correlation coefficient ?= 0.387 indicates a weak positive
correlation between inflation and unemployment in Albania during the
specified period.
The official data for inflation and unemployment in Albania during the
period January 2005- December 2014 are consistent with Friedmans
hypothesis.

Keywords: Inflation, Unemployment, Relation, Spearmans ?, Friedmans
hypothesis, Albania.


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